



























PURCHASING 


ITS ECONOMIC ASPECTS 
AND PROPER METHODS 


BY THE SAME AUTHOR 
A COMPANION VOLUME 


STORING 

ITS ECONOMIC ASPECTS 
AND PROPER METHODS 


215 Pages 6X9 Postpaid $3.50 
96 Illustrations and Forms 






PURCHASING 


ITS ECONOMIC ASPECTS ' 
AND PROPER METHODS 



U 

IN CHARGE OF PURCHASING AND STORING 
NICHOLS COPPER COMPANY, NEW YORK 
AUTHOR OF “STORING,’ ITS ECONOMIC ASPECTS AND PROPER METHODS” 


WITH 

CHARTS, DIAGRAMS AND FORMS 


SECOND EDITION 



NEW YORK 

D. VAN NOSTRAND COMPANY 

Eight Warren Street 

1924 





j 

COPYRIGHT, I91S 
BY H. B. TWYFORD 


COPYRIGHT, 1924 
BY D. VAN NOSTRAND COMPANY 

All rights reserved, including that of translation 
into the Scandinavian and other foreign languages. 

FIRST EDITION 
First Printing June, 1915 

Second “ Aug., 191$ 

Third “ March, 1919 

Fourth “ Dec., 1919 

SECOND EDITION 

First Printing Sept., 1924 


PRINTED IN THE U.S.A, 


ore 29 

©C1A814421 


\ 






ACKNOWLEDGMENT 


The author acknowledges with appreciation the courtesy 
extended to him by manufacturers and Purchasing Agents 
whose purchasing forms are exhibited in this book . 


































































































































































































































. 












































































































































' 








































































































































V 




















































































PREFACE 


E VERY business establishment in the normal 
course of its operations has to make expenditures 
for various purposes to maintain its active existence. 
Divergent views exist as to the relative importance of 
these outlays. This is evidenced by the preponder¬ 
ance of educational efforts directed towards obtaining 
better results from the amounts expended for labor and 
selling expense, while other subjects are comparatively 
neglected or receive insufficient consideration. These 
studies in economics are having far reaching effects and 
it is the object of this book to draw the attention to 
a subject which has been but little touched upon in 
existing literature —the economies which can be 
effected by the use of efficient methods in the purchas¬ 
ing of materials, goods, and supplies. 

Purchasing is one of the primary functions in the 
activities of the great complex structure we call busi¬ 
ness. The acquisition of raw material is the initial 
step incurred in the cost of manufacturing anything. 
In merchandising, a purchase must be made before a 
sale can be effected. In construction work, tools and 
equipment must be procured before workmen can 
commence operations. The significance of this subject 
is brought forcibly to the attention when it is realized 
that every undertaking in its inception involves the 
necessity of buying something, and the continuance 
of its activities perpetuates this important function. 


VI 


PREFACE 


It is easily conceivable that promiscuous buying 
would be a serious handicap to the success of any 
concern. It would render complete success unat¬ 
tainable, and the very existence of an establishment 
might be endangered and jeopardized. For the efforts 
of any organization to culminate in the most desirable 
fruition, it is a predominant constituent principle 
that its expenditures be properly regulated and made 
with wisdom, intelligence, and sagacity. 

Among the most prominent characteristics which 
produced the commercial prosperity of this country 
were: large areas of fertile lands, enormous deposits 
of metals and minerals, and an enthusiastic and am¬ 
bitious people. There are today three other factors 
which make necessary a thoughtful consideration of 
the future. These are: conservation of natural re¬ 
sources, competition, and the tendency to take life 
easier as evidenced by the agitation for shorter hours 
for workmen and longer week ends for employers. 

The cumulative effect of these conditions has 
brought intensive economical operation into promi¬ 
nence, and it is apparent that this must be applied 
to every phase of business to a greater degree as time 
goes on. Regulated and right buying is a study in 
economics, and vast savings can be effected by effi¬ 
cient and proper methods of performing this vital 
function. 

During a period when I was associated with one of 
his enterprises, an American financier with an inter¬ 
national reputation, who was well known for the 
successes he had achieved in various undertakings, 
expressed some opinions to me on buying and the 
economic objects to be attained by proper methods. 


PREFACE 


vii 

Among other things, he said that his experience had 
taught him that the problem of spending money 
judiciously and to good purpose was a harder and 
more difficult task than the acquisition of it. At 
that time some of his views were novel to me and 
since they were the cause of considerable reflection 
on my part, they were possibly the nucleus of thoughts 
which eventuated in this effort. 

He steadfastly held to the principle that a success¬ 
ful foundation for new enterprises, the growth of es¬ 
tablished undertakings, and the accretion to their 
resources is in a large measure dependent on the 
importance attached to, and the careful thought given 
to, the expenditure of all money for capital purposes, 
production, and supplies. He was unflagging in dili¬ 
gently scrutinizing and carefully weighing such ex¬ 
penditures, having in view the object to be attained 
and the practical utility of the result to be accom¬ 
plished by the outlay. 

Personal experiences and struggles with the prob¬ 
lems connected with purchasing materials, merchan¬ 
dise, supplies, and equipment, and in organizing and 
conducting this department of commercial life, to¬ 
gether with a close study of the interesting economic 
questions connected with it, are combined and repre¬ 
sented in this book. It is hoped that some of the 
observations made or the information given may be 
of service and value to the reader. 

H. B. Twyford 

New York City, 

April, 1915. 


FOREWORD TO SECOND EDITION 


I N reprinting the present edition, an entirely new 
chapter has been added on the Legal Aspects of 
Purchasing, and a large number of new forms have 
been inserted. These latter have been gleaned from 
those concerns whose purchasing practice embodies the 
latest developments. It is hoped that these features 
will be useful and attractive to the student of this 
interesting subject. 

H. B. Twyford. 

September, 1924. 


CONTENTS 

PURCHASING 

CHAPTER I 

Principles of Purchasing. General Considerations 

The art of buying. Philosophy of buying. Personality in buying. 
Some present-day methods. Purchasing an interesting economic 
problem .. 


CHAPTER II 

Functional Position of Purchasing Considered 

Importance of good buying to the success of an undertaking. Rela¬ 
tion of buying to cost and selling. Influence of buying on 
profits. Literature on the subject. 

CHAPTER III 
Ethics of Buying 

Ethical standards in purchasing. Buyer and seller. Misrepre¬ 
sentation and its results. Contracts and price fluctuations. 
Competitive bidding. Advantage of prompt payments. 
The offer system. 


THE PURCHASING ORGANIZATION 

CHAPTER IV 
The Purchasing Agent 

Factors and conditions connected with his work. Information and 
knowledge which he must possess. The principal functions 
covered by his activities. His authority defined. Relations 
with other department heads. 






X 


CONTENTS 

CHAPTER V 

The Purchasing Department 


Its sphere of usefulness. Size of department. Employees neces¬ 
sary. Relations with other departments. Subdividing the 
department. Traffic division. Inspecting. Receiving and 
storing. 41 


CHAPTER VI 

Organization of Department 

Organization of personnel. Linking up the employees. Informa¬ 
tion clerk. Requisition clerk. Price clerk. Order clerk. In¬ 
spectors. Invoice clerks. Traffic clerk. Storekeeper ... 53 

CHAPTER VII 
System of Procedure 

General outline. Procedure to be followed in collecting information. 
Purchasing procedure. Invoice procedure. Stores procedure. 
Inspection procedure. Traffic procedure. 62 

OPERATION OF PURCHASING DEPARTMENT 

CHAPTER VIII 

Obtaining and Tabulating Proper Records 

Collecting and recording data and information. Catalogues. Sources 
of supply. Record of past purchases. The purchase record. 
Prices and quotations. Specifications. Inspection reports. 
Analyses and tests. 73 


CHAPTER IX 

Work Connected with Requisitions 

Examining and checking requisitions. Pricing requisitions. Ob¬ 
taining quotations. Final negotiations. 95 

CHAPTER X 

Work Connected with Orders 

Method of handling. Following up orders. Tickler systems. 

Recording shipments. Emergency orders. 114 







CONTENTS 

CHAPTER XI 

Invoices and Method of Handling 


XI 


General considerations. Recording invoices. Preliminary work. 
Checking with order. Checking with material received. 
Checking prices. Freight charges. Extensions. Classifica¬ 
tion. Approval.146 


CHAPTER XII 
Operation of Stores 

General remarks. Receiving material and supplies. Properly 
storing. Delivering from stores. Stores accounting. Stores 
tickler systems. Scrap. Fixing the maximum and minimum 167 

CHAPTER XIII 

The legal aspects of purchasing with a discussion of some purchasing 

problems.203 


PURCHASING AS PRACTISED 

CHAPTER XIV 

Purchasing for a Manufacturing and Construction Com¬ 
pany .213 


CHAPTER XV 

Purchasing for Construction and Operation in Widely 

Separated Localities. 224 

CHAPTER XVI 

Purchasing for a Small Manufacturing Establishment . . 242 


INDEX 


255 











LIST OF CHARTS, DIAGRAMS AND FORMS 


FIGURE NO. PAGE 

1. Comparison of consequences resulting from inefficient buying 

and competent buying . 3 

2. Diagram illustrating the building up process of the cost of an 

article until the selling price is reached. 13 

3. Diagrammatic synopsis of the various matters on which a 

purchasing agent should be posted. 30 

4. Diagram showing in tabular form the main divisions of a pur¬ 

chasing agent’s work. 35 

5. Chart of the functional organization of a purchasing depart¬ 

ment . 48 

6. Chart of the organization of personnel of a purchasing depart¬ 

ment . 57 

7. Chart of system to be followed in obtaining and recording data 

and information. 66 

8. Chart of procedure to be followed from time requisition is 

received until order is completed. 67 

9. Chart of method of procedure for invoices. 68 

10. Chart of stores procedure. 70 

11. Arrangement of shelves for catalogues. 76 

12. Card for indexing catalogues under name of material .... 77 

13. Card for indexing catalogues under name of manufacturer . . 78 

14. Sketch of bookcase for catalogues. 79 

15. Form for keeping record of sources of supply. 81 

16. Record of material purchased form. 83 

17. Record of material purchased form. 84 

18. Purchase record form . 86 

19. Purchase record form. 88 

20. Record of quotations form. 90 

21. Supply record. 94 

22. Purchase requisition . 96 

23. Purchase requisition . 97 

24. Purchase requisition . 99 

25. Tabulation of bids .100 

26. Refinery requisition. 102 


























xiv LIST OF CHARTS 

27. Form of inquiry for obtaining quotations.104 

28. Requisition on purchasing department .105 

29. Requisition for general supply.106 

30. Form for obtaining quotation.107 

31. Request for quotation.108 

32. Telephone request for quotation. 109 

33. Comparison of quotation.Ill 

34. Form of circular letter .112 

35. Form of order.117 

36. Form of order.118 

37. Purchasing department.119 

38. Purchasing department.121 

39. Order form, Richmond Radiator Co.122 

40. Order form, Neptune Meter Co.123 

41. Purchasing department.124 

42. Purchasing department.124 

43. Post-card order .125 

44. Tickler card.126 

45. Reply post-card order.127 

46. Request for information.129 

47. Flexible card.130 

48. Reverse side of flexible card.130 

49. Receiving department file copy.132 

50. Form used for reporting receipt of material.133 

51. General contract.137 

52. General contract.138 

53. General contract.139 

54. General contract.140 

55. General contract.141 

56. General contract.142 

57. Form on contracts.143 

58. Contract record.144 

59. Form used for keeping record of deliveries.145 

60. Invoice record. 150 

61. Discount expires.151 

62. Invoice record.152 

63. Checking invoice.153 

64. Invoice checked.157 

65. Recording shipments and invoices.156 

66. Inspection report. 154 

67. Material received. 159 

68. Form used for certification.160 












































LIST OF CHARTS xv 

69. Receiving memorandum.160 

70. Notice of freight charges paid.162 

71. Debit memorandum.163 

72. Register of invoices to accounting department.163 

73. Material received.168 

74. Material received.170 

75. Receiving report.173 

76. Report of material.174 

77. Receiving department.175 

78. Receiving department report.176 

79. Inspecting copy.177 

80. Received at stockroom.178 

81. Requisition on storekeeper.180 

82. Requisition on storekeeper.181 

83. Requisition on storekeeper.182 

84. Credit requisition.183 

85. Credit requisition.184 

86. List of material required.185 

87. Production record card.186 

88. Material budget.188 

89. Perpetual inventory. 190 

90. Perpetual inventory.192 

91. Stock room sheet.193 

92. Stock room sheet.194 

i 93. Store room bin ticket .195 

94. Temporary ticket.197 

95. Tickler ticket.198 

96. Tickler ticket.199 

97. Report of low stock.200 

98. Purchasing agent.201 

99. Requisition from factories .214 

100. Department requisition.216 

101. Purchase order.217 

102. Reverse side of purchase order .218 

103. Purchase order.219 

104. Request for quotation.220 

105. Follow-up orders .221 

106. Purchase order record.223 

107. Requisition form .226 

108. Purchase order form.229 

109. Purchase order.230 

110. Price quotations.231 












































xvi LIST OF CHARTS 

111. Prints and specifications.232 

112. Inspection order.233 

113. Shipment order.234 

114. Order of follow-up clerk.235 

115. Shipment of material.236 

116. Order of shipment by steamship.236 

117. Tracer request .237 

118. Notice of unrendered invoices.238 

119. Construction office invoice.239 

120. Purchase order record.240 

121. Invoice register.241 

122. Purchase requisition.243 

123. Price record.244 

124. Purchase order form.245 

125. Approval form.246 

126. Index card for orders.247 

127. Foreman’s requisition.249 

128. Foreman’s credit requisition .250 

129. Perpetual stores record.251 

130. Storekeeper’s notice.252 

131. Card for record of patterns.253 

132. Companion card.254 
























PURCHASING 


CHAPTER I 

Principles of Purchasing—General 
Considerations 

The Art of Buying 



^HE steady advance in the art of buying has been 


A one of the determining factors in developing 
scientific salesmanship. It is no longer possible for a 
salesman to walk into a modern purchasing office, 
and carry away an order on the strength of a few 
persuasive arguments and statements regarding his 
goods. 

Today the buyer sometimes knows more about the 
material than the salesman. He should certainly be 
better posted as to its suitability for his particular 
requirements. He has his inspection reports, labora¬ 
tory analyses, and physical tests to guide him. He 
has records regarding past performances of material, 
quantities consumed, and probable future needs, also 
estimates as to the available supply in the market. 

This information can be collected, tabulated, formu¬ 
lated, and reduced to exact knowledge — which is sci¬ 
ence. With this equipment the purchasing power is 
at its maximum, while the salesmanship required is 
at its minimum. Under these conditions the advan¬ 
tage is with the buyer, and the best results in the 


2 


PURCHASING 


matters of price, quality, terms, and delivery are 
obtainable. 

To put this into practical effect, therefore, it is 
necessary to apply systematically the knowledge which 
the purchaser must possess. The information from 
which this knowledge is gleaned is acquired and stored 
by the purchasing department and will be dealt with 
in later chapters. 

To emphasize the importance of this subject, ref¬ 
erence should be made to Figure 1, where the conse¬ 
quences proceeding from a policy of indifference or 
carelessness are compared in parallel with the results 
which can be achieved by the efficient direction and 
operation of the function of buying. 

A glance down the first column will demonstrate 
that severe losses must be incurred by the absence 
of a scientific system and the use of improper methods, 
while the economic benefits and larger profits to be 
derived from a reversal of this policy are set forth in 
the second column. 

To secure these advantages it is essential that 
certain methods pertaining to and peculiar to the 
art of buying should be in force. These features are 
made a special object of study and an exposition of them 
is given. Coupled with these special features it is 
imperative that a proper system be adopted and put 
into practical effect and the activities connected with 
purchasing be governed with wisdom, intelligence, and 
sound judgment. These conditions prevailing, the 
highest standard of efficiency can be maintained and 
the complete benefits and advantages secured. 

The illimitable ramifications of business are supported 
by their interdependence. It is an essential concomi- 


Promiscuous Buying 


Poor Prices 


Inferior Quality 


Purchases made in Excess 
or short of Requirements 


Articles substituted for 
those actually bought 


Investment in Materials 
and Supplies excessive 


Erratic Deliveries 


Unchecked, incomplete 
or excessive Deliveries 


Improperly Checked 
and delayed Invoices 


Loss of Cash Discounts 


Duplicate Payment 
of Invoices 


Inefficient Service, Losses 
and Extravagances 


Regulated Buying 


L owes! Prices for Quality 
Purchased 


Highest Quality for 
Prices Paid 


Exact Quantities needed 
are ordered 


Articles purchased are those 
actually Delivered 


Minimum Investment in 
Materials and Supplies 


Deliveries made in 
accordance with needs 


Exact Quantities ordered 
are Delivered 


Property checked and 
Promptly approved Invoices 


Cash Discounts secured 
by passing invoices promptly 


Security against over payments 


Adequate Service, 

Economical Operation 


Figure No. 1.—A comparison of the consequences ensuing from inefficient 
buying and competent buying. 






































4 


PURCHASING 


tant to the building up of this complicated structure 
that the specialist in any one of its interrelated func¬ 
tions should acquaint himself, to as large an extent as 
possible, with the workings and accomplishments of the 
others. Purchasing is intimately associated and iden¬ 
tified with many branches and divisions of business. 
It is incumbent therefore on the man who specializes in 
it to maintain his general knowledge on lines of the 
broadest conception to enable him to practice his art 
to the greatest perfection. 

The Philosophy of Buying 

Too often the question of price is made the deter¬ 
mining factor in making a purchase without due con¬ 
sideration being given to the other phases of the 
transaction. Price and quality must be considered to¬ 
gether. One sometimes bears an inverse relation to 
the other. High cost was formerly considered an 
indication of high quality, but for one’s special and 
particular needs, the highest quality may be the 
cheapest. Conversely, a material which graded higher 
than the specification might not be equally serviceable 
for the purpose and prove the most expensive. Its 
exact measure of utility and therefore its value, is now 
determined on a more scientific basis than formerly. 

The action of materials, during the manufacturing 
process and in the finished product, has been made 
the object of accurate study, and the information and 
knowledge gained from this study have enabled the 
engineers to draw specifications, which, when issued by 
the purchasing agent to bidders, have brought offers 
of material that will give the most effective results 
and be most serviceable. 


PRINCIPLES OF PURCHASING 


5 


The prime essential therefore is to purchase at the 
lowest possible price, the material which answers most 
fully to these requirements. Definite methods of 
testing should be stated. Specifications not enforced 
are worse than useless. A substituted material which 
had characteristics of higher intrinsic value than speci¬ 
fied might not be equivalent to the specified material 
from a utilitarian point of view. 

These are approximate definitions, and must neces¬ 
sarily be so in reviewing the subject in its relation to 
the whole field of buying, but each individual purchase 
can be weighed and examined with these considera¬ 
tions in view. If requisitions are received, and orders 
are placed without reviewing them, it is an inadequate 
method of procedure and is merely doing a commission 
house business. An indefinite number of specific in¬ 
stances could be given illustrating the importance of 
obtaining the right material at the right price, but 
each individual case has to be decided on its own 
merits and surroundings. 

Common-sense, however, must be used in deter¬ 
mining just what is to be done in the case of each 
purchase. With supplies of all kinds down to the 
most infinitesimal thing, there is always some one 
thing which is the most economical as a purchase for 
one’s particular needs, but the amount involved may 
be trivial, and not warrant the expenditure of more 
than a very limited amount of time. There have been 
exhaustive experiments made with lubricants, when 
the annual purchases did not amount to as much as 
the cost of the experiments in the same period. But, 
where the consumption is large, it is imperative 
that the cost of the lubricant, the cost of material 


6 


PURCHASING 


worn from journals and brasses, and the cost of power 
to overcome friction, should all be carefully computed 
to arrive at the actual value for the specific purpose. 

A large number of instances could be cited, but the 
above illustration will suffice to show that if a curve 
was kept of the usefulness of an article to the pur¬ 
chaser a curve of the proper price to be paid would 
bear a parallel relation to it. 

Where the purchases of one class of material are 
sufficiently large to warrant it, the orders should be 
distributed between two or more concerns, as a meas¬ 
ure of safety. For obvious reasons it is not advisable 
to have all one’s eggs in one basket. This should not 
be done, however, at a sacrifice of price or quality 
unless there are extremely urgent and imperative con¬ 
siderations warranting such a course of action. 

If the material in question is one of the essentials 
in production work, and the supply is coming entirely 
from one source, a serious dislocation of operations 
might ensue from the failure of this one source of 
supply from any cause, even if only temporary. For 
this reason, it is advisable, wherever possible, to draw 
supplies from as widely separated localities as the 
conditions will permit. The risk is then minimized 
from such causes as strikes, lockouts, and breakdown 
of transportation facilities. Dependable sources of 
supply being necessary to successful buying, it is im¬ 
perative that the reliability and standing of the seller 
be known or investigated and his ability to perform 
the obligations he is entering into determined. 

This brings into the subject of right buying the 
question of buying in such a way and in such places 
and from such sources as can be definitely and posi- 


PRINCIPLES OF PURCHASING 


tively relied upon to furnish the goods and materials 
required at the time they are required, and in the 
quantity required, both of which are important eco¬ 
nomic factors in the operation of any establishment, 
or in the carrying out of construction work. 

Buying at inopportune times or in excess of require¬ 
ments is liable to entail severe losses unless there are 
compensating advantages in the matter of price. An 
accumulation of goods or supplies beyond what is req¬ 
uisite to keep the business moving along its appointed 
way, means that the following losses are incurred; de¬ 
preciation, insurance, value of space occupied, and loss 
of interest on investment. 

Personality in Buying 

Personal contact between buyer and seller is not the 
potent factor it once was. This is due to the preva¬ 
lence of more scientific conditions in buying. A 
perfectly satisfactory purchase can be put through 
without the two principals in the negotiation ever 
seeing each other. Personality is just as powerful as 
ever in the consummation of the deal, but it works 
on different lines. Business men will probably never 
cease meeting each other to discuss and close transac¬ 
tions, but personal contact in business is like personal 
combat in war, it is a waning influence in arriving at 
a decision. The tendency is in this direction in buy¬ 
ing. Salesmanship is on a more impersonal basis than 
formerly. The great mail-order houses are examples 
of this, so are the slot machines. 

A good buyer soon gets to know whether the seller 
has scientific and exact costs. If he has, the buyer can 
always tell when he has reached his bottom figure. A 


8 


PURCHASING 


man uncertain of his costs is uncertain of the price 
he quotes. In the case of the man who has exact 
costs, the buyer in negotiating might think he could 
call a bluff on him, and offer him the order at a reduced 
price. It would not be successful; there was no bluff; 
it did not exist. 

Probably every successful buyer recognizes the prin¬ 
ciples of good buying, and although he may not have 
formulated and arranged them in his mind, neverthe¬ 
less, he has undoubtedly a standard by which he does 
his buying, and maxims which he instinctively lives 
up to. 

Some Present Day Methods 

There are thousands of manufacturers in this 
country today who are doing hand-to-mouth buying 
with no well-developed scheme for making their pur¬ 
chases. They have some local jobber or near-by 
manufacturer supply their needs as required, some¬ 
times almost day to day, with such things as a gross 
of files, or some emery paper, or a few bars of steel. 
Their contention is that it is not worth bothering about; 
the local jobber carries the stock for them, and that is 
worth the little extra money they pay him. They 
will also say they want to patronize the local dealers. 

It is possible for them to continue to place their 
orders locally, but let them do it intelligently. Let 
them keep an accurate account of everything they 
use during one year, and the following year ask for 
quotations from the biggest and best manufacturers 
in the country. They will find they can save enough 
money to enable them to carry their own stocks and 
have a handsome profit left. They will not have to 


PRINCIPLES OF PURCHASING 


9 


place their order for a year's supply to be delivered 
at once, the sellers will make shipments almost as 
required. However, most of their orders will probably 
still go to the local jobber, because the result of this 
policy will be to awaken the jobber to the fact that 
he has not been buying right, and he will be able to 
get better figures, which will enable him to retain the 
business. It all resolves itself down to this, that 
thousands of manufacturers are letting some one else 
do their buying instead of doing it themselves, and 
that some one else may be a good buyer, but the 
chances are he is not. 

Purchasing an Interesting Economic Study 

The interest in the subject of buying is not confined 
to the inherent satisfaction which any man experi¬ 
ences when he has brought a negotiation to a success¬ 
ful conclusion. It is heightened by the wide field 
there is and by the constant changes taking place in 
all classes of goods as they pass through one plant 
after another. The numerous processes through which 
various materials go before final consumption, cause 
these to be considered by one manufacturer as fin¬ 
ished product, while to another they are raw material. 
This is due to the great complexity of our manufac¬ 
turing industries. 

The enterprises not strictly of a manufacturing 
character, such as public utilities, mining, etc., cover 
a very wide field, and their activities require the 
purchase of supplies and material, equally as varied 
and complex as the manufacturing industries. For 
this reason a study of the subject offers great diversity 


10 


PURCHASING 


and is of particular interest and attractiveness. Men 
have specialized in various phases of the work, just 
as engineers and doctors have in their professions. 
The fundamental underlying principles, however, 
governing the conduct of the work and the methods 
employed for its accomplishment remain the same, 
whatever the nature and scope of the undertaking. 

Economy of time and materials will never go out of 
fashion, and the saving which can’ be effected in the 
purchasing of materials, supplies, merchandise, and 
equipment, is an economic problem, the investigation 
of which will amply repay any person interested 
in it. 


CHAPTER II 

Functional Position of Purchasing Considered 

Importance of Good Buying to the Success of an Under¬ 
taking 

N O great commercial enterprise has been built up, 
or is continued in active operation, without the 
expenditure of large sums of money. Comparatively, 
this is equally true of every business large or small. 
This expenditure is in a measure a foundation, in 
a sense it may be said to be the corner stone, for 
without this the erection and superstructure of the 
enterprise cannot progress. The purchasing depart¬ 
ment of a business is the instrument through which a 
large proportion of the expenditure is made, and the 
success of the business will be affected by the amount 
of correct thought given to this department, and the 
judiciousness with which the purchases are made. 

The success or failure of a business may be the 
direct result of good or bad buying. This is easily 
conceivable if one studies the consequences which 
either one or the other involves, as set forth in paral¬ 
lel in Figure 1. The importance of the function of 
buying can be readily understood from it, and any 
establishment indifferent to it would need to make 
enormous profits, have little competition, and unlim¬ 
ited capital to survive any length of time. 

There is too great a tendency in some concerns to 
belittle the purchasing and treat it in a negligent and 


12 


PURCHASING 


offhand manner, but this is a very narrow view. It 
is, however, held by the heads of many of the medium 
sized and smaller industries who have perverted ideas 
as to the relative importance of the various sections 
of their business. 

They will not spare expense in an endeavor to in¬ 
crease the results obtainable from the sales depart¬ 
ment, or to develop the effectiveness of the production 
division. There they can see tangible results, whereas 
their vision does not penetrate far enough in the other 
direction to appreciate the benefits to be derived from 
the scientific control of purchases. Without such con¬ 
trol the advantages are intangible, but they can be 
brought out forcibly and succinctly by a complete 
and concise system, and the proper regulation of the 
buying and all that pertains to it. Results can then 
be set forth as clearly as in the sales or production 
department. 

Many thousands of manufacturers hold views of 
buying which are detrimental to their interests, but 
fortunately opposite views are held by our national 
“ captains of industry ” and by all men who give 
business organization close attention. Studious reflec¬ 
tion and investigation by others cannot fail to bring 
to them a realization of the importance and relative 
standing of this vital function of their business. 

While stress has been laid on the importance of the 
function of buying, it must not be forgotten that it is 
a component part of the activities of the concern as 
a whole. Any purchasing agent having a distorted 
or exaggerated idea of the importance of the functions 
of his department, will not be able to do the most 
efficacious work in his sphere of usefulness, and will 


FUNCTIONAL POSITION OF PURCHASING 13 


unconsciously hamper the efforts of the heads of 
other departments, resulting in an unbalanced admin¬ 
istration. 

The Relation of Buying to Cost and Selling 

The great importance of good buying is empha¬ 
sized by the fact that a large percentage of the profits 
of any concern is absolutely and undoubtedly due to 
the ability of the purchasing agent to buy the best 
















14 


PURCHASING 


from a utilitarian point of view for the lowest price. 
This is the first step in the profits. 

Figure 2 indicates the five main stages by which 
a product reaches its selling price. Subdivisions 
of each stage could be given, but as an illustration 
for the present purpose the above is sufficient. It is 
made up from actual conditions existing in a manu¬ 
facturing establishment, and serves to show the im¬ 
portance of starting right by buying right. 

The acquisition of raw material is the initial step 
incurred in the cost of making anything and the rela¬ 
tion of its percentage to the final selling price will 
depend on the nature of the output of the factory. 
If valuable metals are used for raw material the first 
step would be an exceptionally high one, but the 
reverse would be the case if cheap crude raw material 
was used and a highly finished product turned out. 
The production of almost any finished article means 
that the material in it has been bought and sold many 
times because manufacturing industries are interre¬ 
lated to such an extent. This causes great variation 
in the cost of the raw material one starts with, but 
emphasizes the importance of closely watching the 
price and scrutinizing the quality. 

It must not be forgotten that the activities of the 
purchasing agent do not end with the first step shown 
in Figure 2. Indirect expense includes considerable 
quantities of material used in maintenance and repair 
work. There are supplies of all kinds, such as oils, 
brooms, packing material, and office supplies. The 
selling expense includes stationery, catalogues, etc., 
therefore, buying is a factor in each of the stages 
shown. 


FUNCTIONAL POSITION OF PURCHASING 15 


Reference has already been made to the importance 
of so directing, arranging, and controlling all purchases, 
that without an undue accumulation of materials there 
should be at all times sufficient stock on hand to 
enable the production department to maintain its 
activities in unbroken continuity. This has a direct 
influence on the cost of a manufactured article, for the 
losses incurred through overstocking increase the in¬ 
direct expense, as do likewise the losses sustained from 
an insufficient supply of materials and the consequent 
decrease in the output of the factory 

Influence of Buying on Profits 

Regulated and right buying is a study in economics. 
If one looks over the field of endeavor connected with 
production and manufacturing, and observes its ten¬ 
dencies during the past few decades, it will be noticed 
that intensive economical operation is applied more 
closely as time goes on, until a condition exists with 
many concerns, where they save their profits instead 
of making them, or rather they make their profits by 
savings. It does not appear that there will be any 
lessening of this tendency. This country, rich in 
natural resources, with a nation of born salesmen and 
advertisers, has, heretofore, solved the problem of 
getting more profit by making more sales. Conserva¬ 
tion of natural resources and competition have forced 
a realization that an increase of advertising and selling 
expense will not continue to increase the business, in 
proper proportion to this increase of expense. Hence 
the necessity for reducing costs. Right buying strikes 
at the very root of the problem as its economic value 
has a vital bearing on the cost of production. 


16 


PURCHASING 


The profit on any manufactured article is not de¬ 
termined by the price as much as it is by the cost. 
The selling price is fixed by the demands of the public 
and competition. The first effort usually made to 
widen the difference between cost and price is to 
increase the output by encouraging the demand 
through advertising and more scientific salesmanship. 
When the limit is reached in this direction, recourse 
is had to investigating reduction of costs. In cost 
reduction, the principal attack is made on the labor 
item. In the days of primitive manufacturing, labor 
and material were the only two items considered in 
computing costs, but today labor costs frequently 
hold third place, indirect expense and material being 
the two which rank ahead of it. Efficient methods of 
reducing these should go hand in hand with the 
efforts directed at labor costs. To reduce the cost of 
materials, an effective system of buying is compulsory, 
if the best results are to be obtained. 

Literature of Buying 

If the catalogues of any of the well-known pub¬ 
lishers of technical and scientific books are consulted, 
one can find plenty of books devoted to the problem 
of reducing labor costs, but comparatively little litera¬ 
ture can be found on the subject of scientific methods 
of buying. It is an economic study which is deserv¬ 
ing of more attention than it receives. In some of the 
books published on business management, due recogni¬ 
tion is given to the subject, while in others it is treated 
in a cursory manner. 

The paucity of literature on the philosophy of buy¬ 
ing is further accentuated by taking a concrete case, 


FUNCTIONAL POSITION OF PURCHASING 17 


which will illustrate the relative importance of this 
subject to other allied economic studies. 

It has already been pointed out that, in any fin¬ 
ished manufactured article, the value of the raw 
material may have been insignificant compared with 
the labor costs. The opposite may be the case, espe¬ 
cially where valuable metals are manipulated. The 
labor costs are then much lower than the cost of the 
raw material which enters into the product. Take 
for instance an article, the actual cost of which is 
sixteen dollars, that is, without any percentage added 
for indirect expense. Assuming that these sixteen dol¬ 
lars comprise nine dollars for material and seven 
dollars for labor, why should there not be an equal 
amount of educational literature directed to effecting 
a saving on the nine as on the seven dollars? 

It is apparent that this is not done, yet it will in¬ 
variably be found that the application of scientific 
methods in purchasing is equally beneficial in affect¬ 
ing a reduction in raw material costs as similar methods 
are in labor costs. No two industries will show the 
same proportion of labor and material entering into 
a finished product, but the foregoing is a fair assump¬ 
tion, and it seems incredible that one item is selected 
for criticism and discussion, and is made the subject 
of profound study with many volumes devoted to it, 
while the other is treated as a negligible quantity. 

Constructive thinking in its application to the pro¬ 
duction department has been elaborated on in many 
volumes, and in the technical journals and periodicals. 
The literature on the art of salesmanship is volumi¬ 
nous and highly scientific. The problems connected 
with accounting methods have been analyzed and dis- 


18 


PURCHASING 


cussed exhaustively. The intricacies of finance have 
been sifted and examined, and placed before students 
of the subject in an interesting and attractive form. 
This is in contradistinction to the literature devoted 
to the philosophy and art of buying, which is neither 
extensive nor exhaustive, although it is a subject of 
equal importance and is an attractive and alluring 
study. 


CHAPTER III 
Ethics of Buying 
Ethical Standards in Purchasing 

A LL undertakings and enterprises which work in 
the field of manufacturing, transportation, or 
merchandising, whatever their scope, character, or 
nature, are divided into departments for administra¬ 
tion purposes, and the greatest success which can be 
achieved in the conduct of the whole, is by the prac¬ 
tice of the Golden Rule. It naturally follows, that 
to make this policy potently operative, each depart¬ 
ment must work in unity and conformation with it. 
In no section of the business is it more essential to 
keep this strictly in view than in the purchasing. 

The maintenance of a high standard of conduct in 
purchasing raw material wdll have its influence on the 
conversion of them by the production department 
into the finished product, and on their final disposal 
by the sales department. The influence of this policy 
will permeate all transactions which may take place 
subsequent to the actual purchase of materials and 
supplies, or of goods for resale. 

The old saying, “Goods well bought are half sold” 
has been interpreted in many ways, the construction 
placed on the word “well” being the bone of conten¬ 
tion. It has frequently been asserted that “well 
bought” means cheaply bought, the inference being 
that, if bought cheap enough, a ready market can be 


20 


PURCHASING 


found at a profit. Also it has been construed to mean 
that it was a good buy, because a market existed 
where the goods could be quickly disposed of. Again 
it has been defined as obtaining material which was 
needed for manufacturing purposes, and of which a 
limited supply existed, the buyer congratulating him¬ 
self on securing the articles in competition with 
another purchaser. 

The expression “well bought” means all of these 
things and something more. The best has not been 
done, the maximum efficiency has not been reached, 
unless the purchase has been made with the knowl¬ 
edge, that there is a channel for its disposition, that 
the price paid is the lowest obtainable for the quality 
bought, and that some good purpose has been served 
both buyer and seller by the consummation of the 
transaction. To those who think this idealistic, it is 
none the less true, and particularly is it true where 
the‘other fellow's extremity is your opportunity. 

A policy such as advocated does not preclude the 
use of every maneuver which has for its object the 
consummation of the purchase of goods and materials 
at the lowest possible price, or rather of the right 
goods at the right price. Until this object is attained 
every move which good diplomacy may suggest should 
be brought into play. The accomplishment of the 
desired end along such lines will redound to the credit 
of both buyer and seller, to the department, to the 
concern as a whole, and to the universal standard of 
business dealings. 


ETHICS OF BUYING 


21 


Buyer and Seller 

When the man with whom a negotiation is being 
carried on knows he is going to receive a square deal, 
his inclinations will tend towards giving one. There 
are skeptics on this point who will quote instances 
where contrary results apparently ensued from the 
adoption of this policy, nevertheless, if it is consist¬ 
ently followed, it will win in the long run. If what is 
generally known as “sharp practices” are resorted to 
by one party to a negotiation, it is not necessary for 
the other party to use similar tactics to combat them. 

One frequently hears the expression, “ There is no 
sentiment in business.” Too often the meaning im¬ 
plied is that no unselfish motives exist. But this is 
not so. Evidence is abundant to the contrary. Many 
true friendships have been formed between buyers and 
sellers, but ulterior motives have been ascribed to 
them. Business acts are always accompanied by feel¬ 
ings and motives of some sort, and these are not 
wholly selfish. 

It must be remembered that there are ethics of 
selling as well as of buying. Business houses of estab¬ 
lished repute will jealously and assiduously protect 
their reputations, and in dealing with them, mutual 
suspicion and distrust can have no place. The buyer 
with the highest standards of honor and conduct 
governing his motives and actions is going to be met 
in like manner, for the fundamental principles of 
both parties to the transaction will be identical. 

Honesty is interpreted in Webster’s dictionary to 
mean “A nice sense of allegiance to the standards of 
one’s profession, calling, or position,” and this is about 


22 


PURCHASING 


as good a definition as can be given of the purchas¬ 
ing agent’s attitude, to his coworkers in the establish¬ 
ment, and to all men he meets in his multifarious 
duties and transactions. 

Misrepresentation and Its Results 

If by some trick or misrepresentation a seller has 
been inveigled into accepting an order by which he 
stands to lose money, he will invariabfy begin to 
figure how he can evade the terms of the contract 
either in quality or quantity, in such a manner as to 
deceive the buyer, to enable him to break even. 

A loosely worded inquiry has been known to give 
a false impression as to quantity of goods required, 
and when sent out broadcast, has brought so many 
salesmen, some from long distances, to the buyer’s 
office that the combined value of their time and 
expenses exceeded the value of the order. 

This expense must eventually be charged to the 
cost of goods and paid for by the buyer. It is a prob¬ 
lem which can be met by more scientific methods. 
There should be no intent to deceive, nor should the 
inquiry be sent for spectacular effect to firms who are 
not prepared to bid. 

Contracts and Price Fluctuations 

Every arrangement or agreement made between 
buyer and seller is a contract, and is in force until 
completed in accordance with its terms and condi¬ 
tions or until mutually abrogated. Price fluctuations 
have been the cause of many failures to live up to 
agreements, as have also other conditions, which have 


ETHICS OF BUYING 


23 


arisen and intervened to the advantage of one party 
and the disadvantage of the other. 

Unfortunately we cannot do business in the same 
manner as it is still practised by the Chinese in some 
parts of their country, where obligations to buy and 
sell are entered into verbally and the fulfilment 
strictly and rigidly adhered to even if the life of the 
agreement extends over a period of years, and factors 
have arisen in the meantime which are detrimental 
to one of the parties. 

Competitive Bidding 

The principle of competitive bidding must be kept 
alive; if it is abused it will react on the buyer and 
destroy this useful and necessary function to the 
general scheme of buying. Competition is the life of 
trade. If manufacturers and others quoting by solici¬ 
tation are not treated fairly and impartially, they will 
soon become acquainted with the fact. Eventually 
this will prove detrimental to the buyer and render it 
impossible for him to maintain the highest standard 
of efficiency. 

Quotations made by the seller to the buyer are for 
him alone and should be regarded as confidential. 
To disclose these prices to a competitor may seem to 
serve a temporary advantage, but eventually such a 
practice will hurt the purchaser and his concern. 

Advantage of Prompt Payments 

A purchase is always made with an agreed date for 
payment, and a scrupulous regard should be had for 
this and the obligation liquidated as specified. A 


24 


PURCHASING 


seller is entitled to his money exactly in accordance 
with the agreement, if he has fulfilled his part of the 
bargain. A concern whose purchases were very large, 
and who habitually held back payments even for a 
limited time beyond the agreed date, would be taking 
an unfair advantage and possibly putting the seller 
to considerable inconvenience. Some slight advantage 
might be gained by the financial department of the 
buying concern, but this would be more than lost in 
the purchasing department. It is a known quantity 
of power on the side of the purchasing agent, when 
the seller positively knows that the agreed date for 
payment will be strictly adhered to. 

The Offer System 

There are innumerable expedients familiar to every 
experienced buyer, the knowledge of which can only 
be gained by contact with the actual work. It would 
be impossible to enumerate them all, only some broad 
governing principles are given. Some are to be 
avoided. As an illustration there is the “offer” system. 
This is when a quotation has been given and it is the 
lowest that can be obtained and the order is offered 
at a still lower price. If habitually practised, all 
prices quoted will eventually be on a basis that can 
be scaled. 

Purchasing and selling have built up the complex 
structure we call business, with its interminable rami¬ 
fications. A finished article ready for consumption or 
use is the result of successive buying and selling just 
in proportion to the numbers of its component parts. 
This process goes back, widening and spreading until 
it reaches the original raw material. Is it too much to 


ETHICS OF BUYING 


25 


ask that through all these transactions a standard 
of honesty should be maintained which will be recog¬ 
nized and accepted by everybody concerned? 

Every purchase concluded on right lines strengthens 
the position of the establishment it is for, and is 
helping towards the attainment of perfection in busi¬ 
ness intercourse, the upbuilding of national industries, 
and international trade and commerce. 


CHAPTER IV 
The Purchasing Agent 


Factors and Conditions Connected with his Work 

T HE development in the art and importance of 
buying has brought into prominence the men 
in charge of this work, and they now hold a recog¬ 
nized position of distinction and consequence in all 
commercial undertakings. 

It has been stated that there is no such thing as 
scientific buying, but that good buying is the result 
of intuitively knowing when and how to do it, which, 
with a combination of luck, makes a successful buyer. 
It can be admitted that with this equipment a suc¬ 
cessful gambler may be evolved, but intuition is too 
vague a qualification for the purchasing agent of any 
establishment, large or small. There is a great deal 
more necessary in the make-up of any man who has 
charge of such work as is being considered here. He 
should have good judgment, be well balanced, shrewd, 
sagacious, and well fortified with the knowledge which 
he can scientifically accumulate; this, broadened and 
improved by a close study of local and national con¬ 
ditions, will make a purchasing agent a valuable asset 
to any concern. 

The unique position occupied by the purchasing 
agent brings him into close touch with all depart¬ 
ments of a business. For this reason he is often more 
intimately acquainted with its life, growth, and devel- 


THE PURCHASING AGENT 


27 


opment, and has a better knowledge of its needs and 
requirements, than probably any other department 
head in the concern. From this it can be deduced 
that the purchasing agent has opportunities enjoyed 
by few other men in the organization for attaining 
the highest executive positions. In some large cor¬ 
porations the purchasing agent is created a vice- 
president and director in recognition of his abilities 
and owing to the importance attached to the opera¬ 
tions of his department. 

One man is not always wholly responsible for the 
purchases made by any large establishment, but on 
one man the responsibility does rest to a much larger 
degree than on any other, and that man is the pur¬ 
chasing agent. The engineer or the expert specifies 
the material required in many cases, while in others 
the man who actually fabricates the article may have 
to be consulted in the selection of the most suitable 
grade. In the purchase of tools and implements, the 
nature of the work, the conditions under which they 
are to be used, the material they are to operate on, 
and a knowledge of the men who are to use them, 
must be a predominant consideration in making a 
purchase, and consultation would be necessary with 
the man who is to have charge of their operation. 
In buying goods for resale, other considerations must 
necessarily be thoughtfully and thoroughly weighed. 
It is axiomatic, therefore, that the man in charge of 
these purchases must be tactful and diplomatic in his 
dealings with the other men interested, and in addi¬ 
tion he must, to obtain the best bargains, possess 
good business training and be a keen student of 
market values. 


28 


PURCHASING 


The general principles which should govern the ac¬ 
tions of the purchasing agent are the same, whatever 
the nature and size of business. To obtain the best 
results, he must be a man who is able to meet other 
men without arousing their animosity, for to be on a 
good footing with the men with whom deals are being 
made is a great advantage.*. M^n will do for friend¬ 
ship what they will not do for financial gain. One of 
the surest ways of arriving at a good understanding 
with the salesmen is to be able to talk with them 
about their own goods, and a man who can do this 
intelligently will be able to make better deals. 

While the methods in vogue, the organization, and 
the routine work of the purchasing agent’s office, are 
of great importance to its successful operation, it is 
essentially through the character and make-up of the 
man in charge that the best results are obtained. 

In appraising the services of a purchasing agent, 
the assertion has frequently been made that he buys 
as low as is possible, the assumption being that this 
qualifies him as a most capable man for the position. 
Outside of the purchasing agent’s office, and in other 
departments of the business, the matter of price is 
too frequently looked upon as the great or only de¬ 
sideratum. While admitting that this is a considera¬ 
tion which must never be lost sight of and is of 
supreme importance, nevertheless it is imperative 
that in conjunction with the question of price other 
questions must be brought into the calculations when 
a deal is being made. The quality and suitability of 
the goods for the particular purpose for which they 
are needed must be considered. The reliability and 
standing of the seller must be known or investigated, 


THE PURCHASING AGENT 


29 


and his ability to perform the obligations he is enter¬ 
ing into, besides many other factors which will be 
referred to in a later chapter, and wdiich need the 
calm appraisal of a well-balanced mind. 

Shrewdness is essential to the purchasing agent, and 
tactfulness will help him over many rough places and 
assist in the consummation of many advantageous 
transactions. Tact has been described as doing the 
right thing at the right time, and is probably more 
essential in this department of the business than in 
any other. 

Technical knowledge is a great advantage, but can¬ 
not be relied on to develop a successful buyer. The 
vast amount of technical knowledge acquired by ar¬ 
chitects, engineers, physicians, and lawyers, carries 
them to certain fixed points or niches in their profes¬ 
sions; but the men who have achieved the greatest 
successes, or rather who have acquired the greatest 
financial gain, are those who have had the commercial 
instinct working in their make-up in combination 
with their scientific knowledge. 

Technical knowledge without common-sense would 
be of little benefit. In fact, common-sense is perhaps 
the highest requisite for a purchasing agent to possess, 
and this qualification combined with energy, direct¬ 
ness, honesty, and hard work will prove irresistible. 

Matters on which the Purchasing Agent should be 
Posted 

To formulate anything like a complete statement of 
what a purchasing agent should know, would be some¬ 
thing like compiling an encyclopedia. Some of the 
points on which he should be informed have been 


30 


PURCHASING 



Figure No. 3.—A diagrammatic synopsis of the various matters on which the 
purchasing agent should have information when he is making a purchase. 


already alluded to, but in actually making a purchase 
there are certain fundamental facts upon which he 
should be well posted, and which are categorically set 
forth and tabulated in Figure 3. His organization 
and system will keep this information and these 
data in a state of efficient preparedness and ready 
for reference at all times. But it must be remem¬ 
bered that there is no finality to this work. Some¬ 
body has said that “Acquired knowledge is only 
elementary compared with the vast fund of infor¬ 
mation which is yet undiscovered.” This applies with 
force to the information necessary in a purchasing 
agent’s office. 

















THE PURCHASING AGENT 31 

Purchases can be divided roughly into four great 
classes: 

1. Purchases for productive work. 

2. Purchases for resale. 

3. Purchases of supplies, tools, and implements. 

4. Purchases for capital account. 

In all of these the purchasing agent is an important 
determining factor. In the first three he should be 
the final arbiter and have the deciding voice. He 
should conduct and conclude all negotiations affect¬ 
ing price, terms, and delivery. 

In the matter of capital outlays, the purchasing 
agent should always be consulted. If he is a man who 
has a broad conception of his job, his judgment should 
be valuable in arriving at a decision as to the advisa¬ 
bility, the manner, and the most opportune time to 
make an investment, whether it is in additional real 
estate, a new building, or better facilities for carry¬ 
ing on the business of the undertaking, should it be 
a trunk-line railroad, manufactory, or mercantile busi¬ 
ness. In this connection a knowledge of prevailing 
financial conditions will be of service, the causes which 
have brought those conditions about, and the proba¬ 
ble future tendency. This opens up a very wide area 
for research work by the purchasing agent, and an un¬ 
limited scope for the acquirement of knowledge useful 
in his field of endeavor. 

If information is on file as indicated in Figure 3, it 
means that the purchasing agent is posted and ready 
to go into the market to buy at any time fully pre¬ 
pared. He knows exactly 

1. Where he can obtain what he needs, 

2. The quantities he needs, 


32 


PURCHASING 


3. The quality he must have, and 

4. The price he should pay. 

These are the four main considerations to enable 
him to make a satisfactory purchase. Further ex¬ 
planation a little more in detail follows. 

1. Statistics are compiled of all those commodities 
which affect the prosperity of the country and are 
deemed of national importance, such as wheat, cot¬ 
ton, copper, etc., and information as to the visible 
and invisible supply is kept on file by those houses 
trading in them. Most purchasing agents are inter¬ 
ested in some particular material or commodity, about 
which he should have information as to the probable 
quantities on the market and what will be available 
in future. It may not be possible to obtain exact 
data, still much information that is valuable can be 
accumulated and put on record. This will be essential 
to him in negotiating for additional purchases, for a 
surplus or shortage in the supply will affect the price. 

2. All facts connected with consumption in the past 
should be on record, as on this will be based some 
calculations as to future requirements. Additional 
information can be obtained from other departments 
of the business as to the estimated quantities that will 
be needed and probable dates on which deliveries will 
have to be made. There will also be the maximum and 
minimum limits for guidance. These data can be 
ready for reference at any time a question should 
arise as to the advisability of making a purchase. 
Whenever a requisition is received the exact quan¬ 
tities and delivery dates will be definitely known. 

3. In some plants there is an engineer of materials, 
who inspects standardized material and also approves 


THE PURCHASING AGENT 


33 


substitutes which may be offered. He may also have 
control of testing machinery and laboratory. This 
may be independent of production or purchasing de¬ 
partments. Individual conditions will determine the 
advisability of this, but full information should be on 
file in the purchasing agent’s office. In other cases 
one of the many firms of reputable inspecting engi¬ 
neers may be employed to inspect and furnish this 
information. Through these sources the purchasing 
agent can be accurately and fully informed regarding 
the physical and chemical properties of almost any¬ 
thing he buys largely. Such things as coal, steel, 
cement, varnish, paint, etc., are constantly tested by 
large buyers. 

4. The three considerations mentioned will influence 
the price to be paid. The fourth is the prices on 
record, and in conjunction with the first three, it will 
form a sure basis and guide. Quotations received 
should be recorded and kept up to date. If it is 
necessary a price curve should be kept, as this is much 
more illuminative than a tabulated list of figures. 
It is still more instructive if a price curve and quan¬ 
tity curve can both be kept. A later chapter will 
give more details with forms for keeping and record¬ 
ing these data so as to make them available at any 
time. 

If a diagram is made showing the steps by which 
the selling price of an article is arrived at, it would 
show a progressive but unequal series of rises from 
zero to 100 per cent. This is shown in Figure 2 in 
the last chapter. 

Each step represents a percentage of the selling 
price, and a purchasing agent should know enough 


34 


PURCHASING 


of the cost accounting of the factory to enable him 
to trace the part the purchases play in fixing the sell¬ 
ing price. It is better to have an intelligent idea of 
this than to be working in the dark. All persons in 
the organization do better work if they are interested 
in the final result, and this creates an ambition to 
make the best showing in their share of its activities. 

Another problem which is constantly before the 
purchasing agent is the question of dealing intelli¬ 
gently with the many substitutes which are offered 
constantly in place of materials in use. He should, 
therefore, be sufficiently well posted about the busi¬ 
ness to know whether those offered are worthy of 
being tried out. No buyer can afford to ignore the 
many things which are offered at apparently attract¬ 
ive prices, and a knowledge of the products manu¬ 
factured is necessary to enable him to discriminate. 

The Principal Functions Covered by the Purchasing 
Agent’s Activities 

It has been intimated in the earlier portion of this 
chapter what the purchasing agent has to do in gen¬ 
eral, but in the actual carrying out of his executive 
duties it is necessary to be specific. Figure 4 illus¬ 
trates the main divisions of the work which he must 
supervise. 

In large establishments the stores and traffic may 
be entirely separate departments, but even so the pur¬ 
chasing agent has an interest in their work. The 
economic value of a good purchase might be lost, if 
no adequate means existed for receiving and storing 
the goods, or if an excessive freight rate was paid, or 
if delayed in transportation. 


THE PURCHASING AGENT 


35 


H PURCHASING 


Regulate the purchasing. 

Buu at lowest prices. 

Obtain highest quality for prices paid. 
Order only exact quantities needed. 


RECEIVING 6c, 
INSPECTING 


Articles bought are ones actually delivered. 
Quality purchased is delivered. 

Exact quantities ordered are delivered. 
Insist on specifications being complied with. 





S Figure No. 4.— A diagram showing in tabular form the main divisions of ; 
purchasing agent’s work and the principal details of each division. 


In very small plants one man may have to cover 
all of this work, but they are still distinct divisions 
of his activities. In large undertakings the purchasing 










































36 


PURCHASING 


agent will have the necessary assistance to carry 
through the work expeditiously and efficiently. By 
the aid of his assistants he must accomplish the vari¬ 
ous functions of his department, and to do this in the 
right way he must have such men as have suitable 
characteristics for the division of the work he allo¬ 
cates to them. He must organize them into a com¬ 
prehensive whole, and arrange a system that is as 
simple as possible for the proper execution of the 
work. If the purchases are for a manufacturing estab¬ 
lishment, one thing should be remembered, and that 
is that rush orders have no place in a well-regulated 
factory and stores system. Such orders dislocate the 
work of the purchasing office and are not conducive 
to good buying. 

The purchasing agent should at convenient intervals 
visit his principal sources of supply. This will be 
found exceedingly valuable as an adjunct to the in¬ 
formation he has acquired through his regular chan¬ 
nels, and give him a point of view which he could not 
obtain in any other way. 

The tabulated list in Figure 4 will not be discussed 
in detail here. This whole book covers the duties of 
the purchasing agent, but that tabulation puts them 
into succinct form for reference at a glance. 

Definition of the Purchasing Agent’s Authority 

A clear definition should exist as to the authority 
of the purchasing agent to commit his company to 
extensive obligations. The writer has before him the 
copy of the regulations of a large corporation, and in 
reference to the purchasing agent the wording is as 
follows: 


THE PURCHASING AGENT 


37 


“The purchasing agent is charged with the purchase 
of all materials and supplies. A requisition signed by 
the head of a department shall be sufficient authority 
for the supply of materials which in the opinion of the 
purchasing agent are necessary for the execution in the 
ordinary course of the duties with which they are 
charged.” 

It will be seen from this that the onus of responsi¬ 
bility is thrown on the purchasing agent. He there¬ 
fore has to be a man of strong character, and to be 
able to decide what is necessary. Cases have been 
known where the “heads of departments,” who are 
sometimes only foremen, have been in the habit of 
requisitioning entirely unnecessary and useless ma¬ 
terial, involving the concern in severe losses. It is 
therefore essential that limitations should be placed 
on the men who draw the requisitions and there 
should be regulations governing the authority of the 
purchasing agent in the exercise of his duties. 

In certain circumstances and under certain condi¬ 
tions it is possible that no restrictions or limitations 
need be placed on the purchasing agent, other than 
those which the size of the business and its well-known 
requirements and necessities would practically auto¬ 
matically enforce. But in such cases he must have a 
knowledge of the financial resources of the concern. 

In the case of a large corporation whose finances are 
a special study, and which is a borrower more or less 
all the time, limitations must be in force. These 
limitations should be governed by the nature of the 
purchases and the purpose for which they are in¬ 
tended. An amount can be stipulated for general 
monthly purchases, and while they remain below 


38 


PURCHASING 


that figure the purchasing agent should have a free 
hand. 

If there are exceptionally large purchases to be 
made, and the material to be bought is required for 
carrying out a contract into which the corporation 
has entered, then it should be a matter for consulta¬ 
tion between or reference to some other officials. The 
treasurer, sales manager, or production manager may 
have to be consulted or possibly all three. 

When large expenditures are contemplated for ma¬ 
chinery and equipment, it may be necessary to get an 
authorization from the directors. A policy of this 
nature brings together the heads of departments in¬ 
terested and the relation of the actual requirements of 
the corporation to its financial resources are brought 
into harmony. When the decision has been made to 
go ahead with the purchases, the purchasing agent 
should be left in sole charge of the negotiations. 

The treasurer of a company can only pay out the 
funds on receipt of a properly accredited voucher, and 
it does not seem good business policy to place the 
purchasing agent in a position where he can obligate 
his company to an unlimited amount on the receipt 
of a requisition from an irresponsible foreman or de¬ 
partment head. Some scheme to regulate this should 
be outlined in every business, modified to conform to 
its nature and scope. 

Relation of the Purchasing Agent to Other Department 
Heads 

Mention was made of the advisability of the pur¬ 
chasing agent visiting his sources of supply, which 
enables him to post himself on many things which he 


THE PURCHASING AGENT 


39 


cannot get through the ordinary channels, and like¬ 
wise gives him an opportunity to study at first hand 
the manufacturing and business methods of the people 
he is dealing with. 

Similarly, it will be of great benefit for him to see 
at frequent intervals, the heads of departments from 
whom he receives requisitions and confer with them 
on their needs and on any matters which arise 
in connection with the purchases he is putting through 
for them. A much better understanding is arrived 
at in this way than through messages and correspond¬ 
ence, a mutuality of feeling is created, and a reciprocal 
tendency established to help each other, which will 
be found of great advantage. This is particularly the 
case in overcoming shop prejudices, and in those situa¬ 
tions where long use has caused another department 
to grow accustomed to a certain kind of material, 
when there are others in the market equally as serv¬ 
iceable and by the use of which savings can be 
effected. 

The diagrams given in this chapter (Figures 3 and 
4) are intended to illustrate in a condensed form the 
two salient features of a purchasing agent’s activities. 
First he must know certain things and secondly he 
must do certain things. But on both of these 
points he can render himself and his department more 
valuable to the establishment by acquiring from the 
heads of other departments a more intimate acquain¬ 
tance with their requirements and collaborating with 
them in their legitimate aims. This is something 
beyond what appears on the face of the ordinary 
mundane requisition and cannot be tabulated or put 
into diagrammatic form. This is comparable to the 


40 


PURCHASING 


purchasing agent getting better acquainted with the 
concerns to whom he gives orders. He is then on the 
best footing with the people for whom he is buying 
and from whom he is buying. 

It is the custom in some establishments for all com¬ 
munications between departments to be written, but 
this can be carried to an extreme where it is waste¬ 
ful of time, effort, and stationery. For certain matters 
it is necessary, but beyond what common-sense dic¬ 
tates as essential, it should be discouraged. The 
good judgment of the purchasing agent should deter¬ 
mine how far this should be carried. 


CHAPTER V 

The Purchasing Department 

I N reviewing or discussing the function and activi¬ 
ties of a business or one of its departments, the 
subject can be divided under four headings: 

1. The consideration of the work as a whole, the 
various phases of it, and in what manner it can be 
divided to obtain the most efficient results. 

2. The organization of the personnel of the depart¬ 
ment to take care of the work of each division. 

3. The system or method of procedure to be fol¬ 
lowed by the employees in doing the work allocated 
to them. 

4. The actual operation, with the necessary forms 
for carrying out the work. 

In this chapter, the first of these will be dealt with, 
each of the others being the subject of separate 
chapters. 

The Department’s Sphere of Usefulness 

The purchasing of materials and supplies was 
originally segregated because the activities of the 
undertaking demanded the undivided attention of one 
or more persons for this purpose. The organization 
of establishments into departmental formation natu¬ 
rally demanded that the functions of buying should be 
recognized. Thus was created the purchasing depart¬ 
ment, and it now has a fixed and permanent position 


42 


PURCHASING 


in commercial life. It has enabled the other depart¬ 
ments to devote their whole time to their special 
work, and has proved its own existence to be neces¬ 
sary by the economies it has been able to effect, and 
by the usefulness of its work, and the great benefits 
derived from the systematizing of purchases. Its 
growth in efficiency will more fully demonstrate this. 

There is no manufacturing process so simple that 
it does not require a great variety of material and 
supplies to maintain its active existence. This is true 
also of most of our public utility companies and en¬ 
gineering enterprises; and in order that the best in¬ 
terests of the undertaking may be served, the purchase 
of everything needed by each department should be 
centralized, and never delegated to several persons 
scattered through the various sections of the estab¬ 
lishment. Even where a concern has a number of 
factories, or work going on in widely scattered parts 
of the country, there should be central control. In 
such cases it may be advisable to do part of the buy¬ 
ing locally, but there should be a guiding and control¬ 
ling hand, to which the local buying bears the relation 
of fingers. 

The designation of “everything” is used in exactly 
the sense the word implies, and covers raw material, 
machine tools, equipment, and office supplies. This 
policy of centralizing the buying is put into effect 
through the purchasing department, and it should be 
the court of last resort. If manufacturers and sup¬ 
pliers are allowed to solicit business from the heads of 
other departments, coming to the purchasing depart¬ 
ment for a confirming order, it reduces its usefulness 
and standing. Salesmen should not be allowed to go 


THE PURCHASING DEPARTMENT 


43 


over the head of the purchasing agent. He is then a 
known quantity of power and any other policy would 
weaken his position in negotiating a deal. 

The demands on the purchasing department grow 
naturally from the needs of the business, and cannot 
therefore originate with the department itself. For 
this reason it is essential that the work be efficiently 
and expeditiously carried through, for on this depends 
the measure of usefulness it is to the other depart¬ 
ments and to the whole undertaking. There are 
many ways in which this can be demonstrated, and 
standardization will be given as an illustration. 

Standardization of materials is generally recognized 
as imperative, and strenuous efforts are made through¬ 
out all production departments to put this policy into 
effect; but quite often in large undertakings supplies 
and equipment are of such a variety as to bewilder 
one accustomed to uniformity. Such things as sta¬ 
tionery and office furniture seem peculiarly susceptible 
to the vagaries and personal predilections of the heads 
of departments. There will be, for instance, three 
makes of filing cabinets used when one would answer 
for all departments. Many cases could be cited in 
all kinds of supplies. It is particularly noticeable in 
some of our municipalities. The standardization could 
be effected through the purchasing department more 
readily than any other source, as it is the clearing 
house for all requisitions. Economical considerations 
and the question of convenience should compel atten¬ 
tion to this. Certainly better prices can be obtained 
if standard articles are bought which can be used in 
any department, and the convenience derived from 
their being interchangeable cannot be overlooked. 


44 


PURCHASING 


Size of the Department 

This department of a business may be large or 
small. It should be proportioned in size and impor¬ 
tance to the actual requirements and necessities of the 
undertaking. In a large corporation devoted to trans¬ 
portation, public utilities, or manufacturing, this will 
mean a purchasing agent with a staff of assistants 
necessary to such an organization. 

In a strictly merchandise business, there will be 
buyers for the numerous departments who act indi¬ 
vidually under certain restrictions and sometimes 
under central control. 

Some of the large railroad combinations which 
operate lines in various sections of the country have 
a system of co-ordinating their purchases through a 
purchasing agent who has his office in close proximity 
to the president and directors, and possibly not any¬ 
where near the railroad for which he is buying. 

Manufacturing concerns with factories in widely 
separated parts of the country have found it to their 
advantage to have a central control for purchases. 
This is sometimes done through a supervisor of pur¬ 
chases, under him being a purchasing agent for each 
factory. Good results have been obtained through 
such a scheme in the matter of price, uniformity of 
raw material, and better regulation and control of 
purchases, consequently making things easier and 
smoother for the financial department. 

The size of the department can be graduated to 
meet the needs of every establishment until in small 
concerns there may be only part of the services of 
one man required; nevertheless, it is strictly a de- 


THE PURCHASING DEPARTMENT 


45 


partment of the business, and the fundamental prin¬ 
ciples governing its work remain the same irrespective 
of its magnitude 

The Employees of the Department 

The staff necessary will of course be governed by 
the volume and importance of the work passing 
through the office. There must be sufficient number 
of employees to carry through promptly and efficiently 
the daily routine operations. A department has failed 
because through outside pressure it has been forced 
to reduce its staff to a point where the work could 
not be carried through in its normal course, or it has 
been compelled to employ inferior help with a cor¬ 
responding reduction in efficiency. This is not econ¬ 
omy, it is parsimony. If the work of the department 
is worth doing at all, it must be well done or it has 
no reason for existing. 

A department may fail in its mission from other 
causes. It may become overloaded, top-heavy, and 
encumbered with too many employees, or an un¬ 
workable system of operation. Either of these con¬ 
ditions will mean a reduction in efficiency, and if its 
continuance as a useful factor in the business is de¬ 
sired, reorganization will be necessary. 

Greatly increased efficiency can be obtained by 
effective team work, and among the members of the 
department there should be engendered a spirit of 
good feeling and co-operation, which should be en¬ 
couraged to spread to all the points where contact is 
made with other divisions of the enterprise. This is 
of inestimable benefit in overcoming friction. 


46 


PURCHASING 


Relations with Other Departments 

A staff which is entirely unsympathetic with the 
particular needs of the users of the material will fail 
to grasp what is one of the most essential things 
necessary for this department. They will be dealing 
with papers and accounts instead of with men and 
things. 

It is up to the head of each department to bring 
about and keep in existence this harmonious relation, 
and tact, discretion, and diplomacy should be exer¬ 
cised by all the staff, for this department is constantly 
in contact with others. Every purchasing agent has 
had the experience of being told what is thought of 
his department when any delay has occurred in ob¬ 
taining material. It is assumed at once that the 
purchasing department is entirely out of sympathy 
with the legitimate aims of other departments. 

Every department of a business is a member of one 
family and although each member must stand on its 
own feet and work out its own salvation, it should 
nevertheless be willing and ready to assist and make 
as smooth as possible the workings of every other 
department. This can be done without much over¬ 
lapping, which should be avoided wherever possible. 
The duties of each can be clearly defined and the work 
allocated so that no friction will exist, and happy 
is the concern which can carry on its multitudinous 
activities in such a manner, for it is no exaggeration 
to say that vast sums are lost where these conditions 
do not prevail. There should be a meeting point be¬ 
tween any two departments where no clashing, fric¬ 
tion, or jealousy exist, but where the necessary 


THE PURCHASING DEPARTMENT 47 

intercourse and junction between the two flows as 
smoothly as the traditional village stream. 

It is a question mainly of being able to meet and 
handle the peculiarities and prejudices of the human 
element. Any concern comprising many departments 
may have to meet this in an acute form, but with the 
right methods it can be met with the least amount of 
inconvenience and hindrance to the work of any 
department with an appreciable resultant gain. 

The attitude of the other departments of the under¬ 
taking will be a reflection of the purchasing depart¬ 
ment’s service to them, and the criterion by which it 
will be measured. Mutual confidence and co-opera¬ 
tion will be attained by a policy of tact and willingness 
to help. The lines of demarcation between depart¬ 
ments are not boundary lines between two countries, 
where many formalities have to be gone through 
before one can cross. 

Subdividing the Department 

Figure 5 illustrates in a distinctive manner the 
method of dividing the work of a purchasing depart¬ 
ment. There are really three main divisions of the 
work connected with purchasing, these being: 

1. Information, which includes: 

a. Obtaining information as to sources of 

supply. 

b. Recording data of past purchases. 

c . Recording prices and quotations. 

d. Keeping results of inspections and tests. 

e. Maximum and minimum quantities and 

future needs. 


48 


PURCHASING 



Figure No. 5.—Chart of the functional organization of a purchasing 
department. 


2. Purchases, which is subdivided into: 

a. Work connected with requisition. 

b. Obtaining quotations. 

c. Placing orders and following up. 

3. Invoices, which is subdivided into: 

a. Recording and checking with order. 

b . Checking prices, classifying, etc. 

c. Approving and passing to accountants. 













THE PURCHASING DEPARTMENT 


49 


There is other work which is in some cases included 
in purchasing department, and in others is entirely 
separate. This work is connected with: 

4. Traffic, which is subdivided into: 

a. Seeing that shipments are properly classi¬ 

fied; 

b. That correct freight rates are obtained; 

c. That no delays occur in transit. 

d. Getting quick adjustment of claims. 

5. Inspection, which includes: 

a. Inspection of material before or on arrival. 

b. Making physical and chemical tests. 

c. Reports on material in shop and in the 

finished products. 

6. Stores, which is subdivided into: 

a. Receiving material and supplies. 

b. Storing in secure and proper places. 

c. Delivering for consumption as needed. 

d. Keeping proper and reliable accounts. 

The first three sections, which are connected with 

purchasing, are dealt with fully throughout the book; 
but the other divisions, which are not essentially a 
part of the function of buying, call for some remarks 
on the principal features of their activities. 

Traffic Division 

In industrial economics the study of problems con¬ 
nected with transportation and stores keeping are ex¬ 
tremely interesting. The efficient operation and con¬ 
duct of the work coming under these designations is 
vital to the well-being of any concern. They are 
closely related to the work of the purchasing depart¬ 
ment, but owing to the magnitude of the undertaking, 


50 


PURCHASING 


or some other good reason, the work connected with 
traffic and store keeping does not come under the pur¬ 
chasing agent’s control, but these are organized as sepa¬ 
rate departments. This is a matter for solution as 
found best in each individual case. If the regulations 
governing the purchasing department require it to 
buy and furnish materials and supplies, then it is 
certainly part of its duties not only to buy, but to 
deliver the goods to the department needing them. This 
means arranging and controlling transportation, re¬ 
ceiving, properly storing, and finally delivering them 
to departments for consumption when they are ready 
for them. 

* The main objects which are achieved by the proper 
and efficient control of the traffic problem are: 

Goods are received promptly and correctly. 

Shipments are made properly. 

Teaming is arranged on most economic basis. 

Freight charges are lowest obtainable. 

Claims are quickly adjusted. 

It is not the province of this book to go deeply 
into this interesting subject. The brief description 
given will convey some impression of its economical 
importance in all transactions involving the move¬ 
ment of merchandise, material, and equipment. 

Inspecting, Receiving, and Storing 

The proper inspection, receipt, and storing of mate¬ 
rials and supplies are of great importance. The prin¬ 
cipal advantages secured by the efficient control of 
these functions are: 

1. The receipt of goods as ordered, both in respect 
to quantity, quality, weight, and size. 


THE PURCHASING DEPARTMENT 


51 


2. The rejection of excess quantities or those incor¬ 
rect in weight or size, or inferior in quality. 

3. The absolute knowledge that, when invoice is 
checked with material receipt, you are getting exactly 
what you are paying for. 

4. The proper care for material until such times as 
it is needed for consumption, with the minimum 
amount of deterioration. 

5. The maintenance of a complete and perpetual 
inventory during the period that goods are at rest in 
the stores. 

6. The delivery for use or consumption exactly as 
and when required, with a complete record of same. 
Cost accounting would be practically impossible with¬ 
out this. 

The perpetual inventory serves to show when stocks 
are reaching, and have reached, the maximum and 
minimum permissible. The fixing of this limit in both 
directions is of the highest importance. It enables 
sufficient material to be carried in stock for the needs 
of the business, and is a preventive against overstock¬ 
ing. There is a monetary value in being able to furnish 
promptly to the production department such material 
as they need at the precise moment it is required. 
Active stocks can be maintained at the minimum 
consistent with safety. ^ Investment is kept at the 
lowest possible point. The space occupied is re¬ 
duced to the smallest dimensions. All these are 
gains, whereas if stocks carried are excessive for 
needs of business, or if track is not kept of the 
activity of certain stocks and they accumulate 
beyond requirements, or if “dead” stock is carried, 
the following losses are incurred: depreciation, insur- 


52 


PURCHASING 


ance, obsolescence of money invested, value of space 
occupied. 

The perpetual stock record is theoretically a cor¬ 
rect basis for periodical inventories, but the human 
factor must be taken into account, and some dis¬ 
crepancies are always shown when actual count is 
made. The nature of the stock has something to do 
with this. It is remarkable, however, how closely these 
check up in well-kept stores. In theory it should 
balance as accurately as the cashbook. When check¬ 
ing the perpetual inventory with stock in stores it is 
not necessary to make a count of all items at one 
time, but it can be done in sections while routine 
work is going on until the whole is covered with fre¬ 
quency and regularity. 


CHAPTER VI 

Organization of Department 


Organization of Personnel 


T HE purpose of this chapter is to endeavor to 
outline the organization of the staff of the de¬ 
partment. It is not possible to present to the reader 
an office completely organized to fit any condition, 
all the employees at their respective desks with the 
necessary equipment as a potent working force. 

Some purchasing departments have been in existence 
so long that their evolution and growth are shrouded 
in obscurity. The origin, however, in all cases has 
been the same: the necessity for a systematic method 
of making and controlling purchases. From this need 
the idea sprang and was followed by the apportioning 
of part or the whole of one man’s time or the alloca¬ 
tion of several men to the work. 

This was the nucleus from which all purchasing 
departments started, and a similar scheme must be 
followed by any concern desiring to bring its policies 
into recognized lines of highest efficiency. 

The purchasing department is an economic develop¬ 
ment itself, and therefore its internal management 
should exemplify this policy. This does not mean that 
cheap men should be selected for the work, as such 
a policy would be like buying the lowest priced article 
which might prove the most expensive from a utili¬ 
tarian point of view. 


54 


PURCHASING 


The main object to be achieved is to get the work 
done ably, correctly, and expeditiously at the least 
cost. Cheap men and mistakes are more expensive 
than high-priced men and efficiency. 

The organization should be complete, but at the 
same time should consist of the smallest possible 
number of employees. Work can always be carried 
out more effectively when there is sufficient to keep 
each person diligently engaged rather than when there 
is a superfluity of employees without proper duties to 
assign to each. 

In any active business the purchasing department 
fulfills one of the most vital functions of the con¬ 
cern, and its activities cannot be stopped or delayed. 
In considering, therefore, the number of employees 
necessary for the department, this must be borne in 
mind and provision made for the work to continue 
during the temporary absence of any employee. 

To provide for this contingency means that each 
person in the department must have an understudy, 
or the work allotted to him must be of such a nature 
that it can be portioned out among the others for 
short periods. There should be no indispensable man 
in the organization. 

This policy has a beneficial effect in making the 
force more adaptable, and has a tendency to make a 
man take more interest and do his work more intelli¬ 
gently, because it gives him a broader view of the 
work as a whole. He sees more clearly where his 
particular duties fit in, and he may be enabled to see 
improvements which can be effected. 

This also brings more intelligent co-operation be¬ 
tween the employees which has a direct influence in 


ORGANIZATION OF DEPARTMENT 


55 


securing more completely the objects to be attained, 
and is of inestimable benefit to the conduct of the 
work. It is also conducive to more enthusiasm, 
and enthusiasm breeds loyalty and contentment, 
which beget efficiency. 

One cannot take the plan of the organization of 
any going concern and implant it in another estab¬ 
lishment as a solution of the latter’s problem, and as 
embracing all the elements necessary for the perform¬ 
ance of its work. Circumstances and conditions 
vary to such a degree that this is not possible even 
where the nature and volume of the business are 
practically identical. 

It is therefore intended that the organization as 
outlined here should be looked upon more for helpful 
suggestions. It is one of the constructive duties of 
the purchasing agent to plan the details of his depart¬ 
ment and anything he finds useful in this suppositi¬ 
tious organization will have to be adapted to his own 
surroundings. 

Theorizing does not accomplish anything, but it is 
generally the product of experience, and put into prac¬ 
tice produces experience. 

In studying employees, the men selected for the 
various phases of the work should be chosen with a 
view to their natural aptitude for the work to which 
they are assigned. 

Linking up the Employees 

Where the organization is large enough to warrant 
its being subdivided for the better performance of 
its duties, great care must be taken to form these 
subdivisions in such a manner that intercommunica- 


56 


PURCHASING 


tion is easy and made without perceptible retardation 
of the work. 

Another matter to be considered is the Unking up of 
the individual work of each member of the organiza¬ 
tion to form a composite whole. An endeavor has 
been made in Figure 6 to demonstrate this. It is 
only intended here to briefly outline the duties of the 
members of this tentative organization for the better 
understanding of the chart. Their complete activities 
will be described when each function is dealt with in 
detail. 

Information Clerk 

A large proportion of the work of the department 
can be done only by frequent reference to the infor¬ 
mation and data on file. It will be necessary for the 
person in charge of this to keep his records up to date. 
He must have all requisite facilities for obtaining and 
retaining the data as to prices, sources of supply, past 
purchases, catalogues, inspection reports, etc. He 
must, therefore, be methodical and systematic, and be 
ready to furnish the information promptly and cor¬ 
rectly or have it in such shape that it can be easily 
referred to. 

Requisition Clerk 

Requisitions frequently come into the office with 
incomplete information on them, and it is the duty 
of the man handling them to see that they are in 
proper order and that the material is correctly specified. 
He will have to refer to the information files con¬ 
stantly and must be in close touch with the man 
having charge of these. 


ORGANIZATION OF DEPARTMENT 


57 



Price Clerk 

The price clerk will specify the price from agree¬ 
ments or contracts which are already in force, or obtain 













58 


PURCHASING 


quotations, make comparisons of the prices, and submit 
them to purchasing agent. 

Order Clerk 

The duties of the man in charge of orders will be to 
see that they are properly written up from specifica¬ 
tions and with correct prices, check them before the 
purchasing agent signs them, and follow up after they 
are placed. Copies will have to be sent to parties 
interested. 

Inspector 

The inspector will receive copy of order and inspect 
material either in the plant or at point of shipment, 
reporting to purchasing agent and possibly to store¬ 
keeper. He may also have to furnish reports on the 
action of materials during the process of fabrication. 

Invoice Clerks 

There will be as many men as necessary on this 
work, recordtng invoices, checking with order, check¬ 
ing prices, classifying, having traffic man approve 
freight charges, and finally passing invoices to account¬ 
ants. Part of this work is sometimes done in account¬ 
ant’s office. 

Traffic Clerk 

There are many industries whose activities are not 
of sufficient magnitude to warrant the maintenance 
of a separate traffic department. Again, some con¬ 
cerns whose operations are very large can, from the 
nature of their work, combine this work with the 
purchasing organization. This is the case where the 


ORGANIZATION OF DEPARTMENT 


59 


orders placed are mainly for construction work and 
traffic matters all pertain to these purchases, there being 
no shipments from factory for sales department. A 
man should be selected for this work who is conver¬ 
sant with its character and the problems involved in it. 

Storekeeper 

A reference to Figure 6 will show in what manner 
the storekeeper is linked up with the various activities 
of purchasing. He is more directly interested in the 
actual movement of the material itself and its conser¬ 
vation. The purchasing agent has indirect connection 
with the storekeeper through the order clerk, but the 
storekeeper on his part must have direct access to 
the purchasing agent, and an effort has been made in 
the diagram to show how this is accomplished. 

When the activities of the purchasing department 
are restricted to buying, the stores organization would 
be formed independently, but it is sometimes found 
advisable to combine the keeping of the stores with 
the purchasing, especially in the smaller manufacturing 
concerns. A short summary of the organization to 
take care of this work is given here. As in the traffic 
division, the volume of the work to be accomplished 
will determine the number of employees requisite. 
This will vary greatly with different concerns, but 
arrangements must be made to cover the following 
points irrespective of the number of employees or¬ 
ganized to do it: 

Receipt of all material and supplies. 

Checking to see that they correspond with orders. 

Counting, weighing, and measuring. 

Placing in proper storage compartments without 


60 


PURCHASING 


undue delay, or in some cases delivering directly to 
department for consumption. 

Entering on receiving records. 

Making entry on stores record or perpetual inventory. 

Delivering from stores to various departments all 
material and supplies required by them. 

Making entry on perpetual inventory. 

Keeping stores tickler in force and advising pur¬ 
chasing agent. 

Keeping record for cost accounting. 

Receiving scrap into stores, counting, weighing, and 
measuring, and advising purchasing agent. 

These are the principal points to be covered and a 
good man should be placed in charge with the neces¬ 
sary clerical help for keeping up the records. In 
handling the material, arrangements must be made to 
give all the help required. The men engaged in the 
physical operation will be under orders of the store¬ 
keeper. In small factories it is not always possible 
for these men to be a fixed number and temporary 
assistance can be drawn from other departments to 
assist with heavy material. 

When the cashier receives a dollar he is held ac¬ 
countable for it, and has to keep a proper record of 
its disposition. A dollar’s worth of brass tubing is 
just as much an asset as a dollar in cash. The hon¬ 
esty, integrity, and reliability of the storekeeper must 
be on a par with the cashier. In fact, the storekeeper 
must be more watchful and careful in guarding against 
petty thefts. The assets under his control cannot be 
placed under lock and key and sometimes many per¬ 
sons are handling them in receiving into and delivering 
from the stores. 


ORGANIZATION OF DEPARTMENT 


61 


A further reference to Figure 6 will illustrate that 
the organization of the personnel is dependent upon 
three main sources for the arrangement given of their 
work. These sources are shown at the head of the 
chart. The functions of each member of the depart¬ 
ment originate from one of these and the performance 
of the work of each follows a well defined course. 
There are however many minor activities which are 
common to almost any business office but which are 
too well known to need detailing here. 


CHAPTER VII 
System of Procedure 


General Outline 

W HATEVER the size or scope of the department, 
it is absolutely essential that there should be 
a proper system on the lines of which the work can 
be carried along, but system does not perform an 
operating movement. It is simply the well-kept track 
on which the energy and efficiency of the organization 
put through the work to be accomplished until the 
terminus is reached. This track must be kept as 
straight and level as the nature of the route to be 
traversed will permit, with the least possible number 
of curves and grades, and where these cannot be dis¬ 
pensed with, they should be gradual and easy. 

In pamphlets and books on various systems for 
office, store, and factory management, statements are 
frequently made regarding what a good system will do. 
As a matter of fact, a system of itself will do nothing. 
It may be inert and useless unless operated. A good 
system can be compared to a trunk-line railroad with 
useful and profitable branches. Care must be taken 
that no unprofitable extensions and branches are 
added, or they will be a burden and expense and 
retard and clog the work of the main line with the 
prospect of rendering the whole a failure. 

Forms and office implements do not make a system, 
they are the vehicles or implements necessary for 


SYSTEM OF PROCEDURE 


63 


operation and will be described in subsequent chap¬ 
ters. They should be as few as possible, for then the 
work will be expedited. Too many forms are cum¬ 
bersome and retard the work. 

The aim should be to plan or outline a route for 
the work of the office, which shall have a definite 
object in view and be coherent, logical, and thorough. 
It should expend the least amount of the energy of the 
organization. Simplicity should be kept in view, 
and all forms used should be devoid of any features 
likely to lead to complications. Have the system 
cover everything essential to gather into concise 
form the necessary data, and in such a way that they 
are readily understood and easily accessible. When 
this object is attained stop, but do not stop until it is 
attained. 

If a condition of over-systematizing is allowed to 
come into existence, it is a menace and will lead to 
confusion. An abnormal desire by the head of a de¬ 
partment to secure and maintain records covering a 
mass of detail not pertinent or essential to the depart¬ 
ment, will eventually crush it by its own weight; 
while an incomplete system will render the work and 
operation of the department laborious and inefficient. 
A good system will help towards order, regularity, and 
expedition. 

The justification of a system is its effectiveness in 
covering with accuracy and dispatch all the points 
comprehended in the work of the office with the ab¬ 
solute certainty of increased economy. 

It is necessary to design and lay out one’s own 
system. Although valuable suggestions are obtained 
by studying others, they can rarely be adopted with- 


64 


PURCHASING 


out alterations and changes to meet the conditions 
of one’s own case. A good system is really dictated 
by common-sense. It has to be administered by the 
organized staff in the office with all the human frail¬ 
ties, and the better co-ordination it can bring to their 
efforts, the greater its potentialities for success. 

There are thousands of men today at the head of 
large establishments who look on system as so much 
red tape, and the observance of any logical routine 
in handling their business is repugnant to them. Cer¬ 
tainly they have their methods of doing work, but 
they are imbued with the idea that there is some 
inherent complexity in a correct system. The writer 
knew of a manufacturer, whose annual business 
amounted to several hundred thousand dollars, with 
the following routine for making purchases: A fore¬ 
man would need some material and would make a 
memorandum of it on any piece of paper which came 
first to his hand. This “scrap of paper” was sent to 
the office where the bookkeeper would write an order. 
Price was never questioned, quantities in stock were 
unknown, and invoices checked from memory. If 
material was urgently needed, the bookkeeper would 
telephone for it, not sending a confirming order. If 
he happened to be out of the office, the foreman 
himself telephoned. 

Some men do business with methods such as these 
and make money, but it is only when their profits 
are abnormally large, and when brought into the 
strong light of competition with businesses which have 
an efficient purchasing system and accurate methods 
of cost keeping, they would be pushed to one side and 
probably not know the reason why. 


SYSTEM OF PROCEDURE 


65 


A system is a means by which the purchasing agent 
can put the work through the office by the shortest 
route, giving the most efficient service at least cost. 

System of Procedure for the Collection of Data and 
Information 

The collection of information pertinent to the ac¬ 
tivities of the department is an absolute necessity if 
it is to be kept thoroughly posted. And, unless the 
members of the department want to trust to their 
memories, it is equally imperative that all of this in¬ 
formation should be assorted, converted, reduced, or 
arranged so that it can be placed in convenient and 
handy receptacles ready for instant reference by the 
purchasing agent or his assistants. This is the stored 
knowledge of the department and is a potential factor 
in its operation. 

Figure 7 shows the route to be followed in reaching 
out and acquiring the various items of information, 
printed matter, etc., which are necessary to make the 
files valuable for reference. A full description of this 
work will be found in the chapter on Operation of the 
Department. On receipt of the information in the 
office, or in posting it from quotations and orders, 
an orderly and logical arrangement should be followed 
by simple processes, so that there may be concentrated 
in clear and concise form a complete expression of the 
data required. 

Except the data and information posted directly 
from office records, all the other matter relating to 
this phase of the work can pass through a regular 
clearing-house system and be sorted and placed in its 


66 


PURCHASING 



♦ 


Figure No. 7.—Chart of system to be followed in obtaining and recording information requisite in a purchasing office. 





SYSTEM OF PROCEDURE 


67 


proper receptacles ready for reference at any moment 
by the office staff or purchasing agent. 

Purchasing Procedure 

The system followed in making purchases is very 
clearly illustrated in Figure 8. The requisitions com¬ 
ing into the office constitute the authority to make the 
purchases. They should be seen first by the head of 


Completed and 
p/acedin'Vead \^J 


Recording Shipments^\ 


Followir 

tia 


Requisition 



Making out order 
‘ ?ckmg & mailir 


Final negotiations 
as to price, terms.ei 


Making Receiving 
Comparisons Quotations 


Checking for 
Validation 


Checking with 
\) production order 


O Checking with 
max . A min. 


fast purchases 
&, performances 


r^sS ee if material is 
( ) P r °perJy specified 


Price. Terms and 
delivery 


Sending out 
ipquiries 


Figure No. 8.—Chart of procedure from time requisition is received until 
order is completed. 
















68 


PURCHASING 


the department if possible — some establishments are 
so extensive that this cannot be done and they are 
passed along to an assistant. The department will 
have a list of the men authorized to sign requisitions 
and they must be examined to see that they are signed 
by a properly authorized person and that the classifi¬ 
cation of material is stated. In a manufacturing es¬ 
tablishment it may be necessary to check it with 
production order, also with maximum and minimum 






SYSTEM OF PROCEDURE 


69 


and past purchases. The proper specification of 
material will have to be obtained from records and 
attached to requisition. The price will then be in¬ 
vestigated, and if it is an established one, the order 
can probably be placed at once; if not, quotations will 
have to be obtained and compared, submitted to 
purchasing agent for final negotiating, and will then 
follow the same course as those orders for which no 
quotations were obtained. The chart clearly indi¬ 
cates the final course the orders take. 

Invoice Procedure 

All invoices coming into the purchasing department 
follow a course similar to that outlined in Figure 9. 
The various steps are shown with sufficient clearness 
to enable the procedure to be closely followed. In 
some establishments some of these steps may be cut 
out; such as, checking with material received, and 
checking extensions, which may be done in the ac¬ 
counting department. All the features connected with 
the approval of the invoices have to be accomplished 
in one department or the other before they are 
vouched for payment. 

Stores Procedure 

Figure 10 shows the system followed by the store¬ 
keeper. On the left the course of procedure is indi¬ 
cated in receiving and checking, storing and recording 
material. On the right are the deliveries of material 
to, also material received back from, shop. All three 
of these finally get on to the perpetual inventory and 
from there follow an identical route. Scrap received 
into stores is shown on a course of its own, so also is 


70 


PURCHASING 



1 

1 

|| 

| 

S § 

^ V) 

fie 

£ 

N 

.§>1 

.8* 

rt- 

I 

§ 

11 

$ 

r 


A dvising Purchasing Agent 
Figure No. 10.—Chart of stores procedure. 







SYSTEM OF PROCEDURE 


71 


the work connected with production orders, if this is 
handled by the storekeeper. 

Inspection Procedure 

Inspection is not properly part of the internal work 
of the purchasing department, and is not therefore 
shown on above charts. Nevertheless it cannot be 
ignored in arranging the methods of procedure. 
Copies of certain orders with instructions must be 
sent to the inspector and reports will be received from 
him. Invoices may have to be held until these come 
in. The relation which inspection bears to the other 
functions of the organization is shown in Figure 5 in 
the preceding chapter. 

Traffic Procedure 

If the work connected with transportation matters 
is handled in the purchasing department, a system 
of doing it must be devised on the following lines. 
Information and data must be recorded and kept 
handy for reference in a manner similar to that out¬ 
lined for purchasing records. The system of records 
must comprise the following: 

Freight classification of goods. 

Rates from his own and competitors’ shipping points. 

Switching and terminal charges. 

Record of business done with each railroad company. 

The following is the routine work which will have to 
be systematized: 

Defining the manner in which goods shall be packed. 

Routing of all freight. 

Making arrangements with transportation com¬ 
panies for shipments. 


72 


PURCHASING 


Arranging for all teaming. 

Tracing shipments when delayed. 

Getting proper receipts for shipments. 

Checking and approving all freight and teaming 
charges. 

Handling all claims against transportation com¬ 
panies. 

A reference to Figure 5 shown in preceding chapter 
will indicate where the traffic function comes in con¬ 
tact with the other work of the organization. 


CHAPTER VIII 

Obtaining and Tabulating Proper Records 


The Collection and Recording of Data and 
Information 



^HE following chapters will describe the actual 


A operation of a purchasing department. In doing 
this a description or illustration of the forms to be 
used and any other equipment which may be required 
for doing the work will be given. The compiling, 
assembling, and keeping the data and records, while 
perhaps not the most important section of the work 
of the office, have been mentioned first in previous 
chapters and will be so dealt with here. It is essen¬ 
tial that it be kept in compact and concise form and 
intelligently arranged for easy reference. It is not 
radically different from corresponding work in any 
other office, but there are some special features con¬ 
nected with it which need close observation. 

One thing which should never be lost sight of is 
that there is no finality to this work. When a requisi¬ 
tion comes into the department and is disposed of in 
the regular way, the order placed, material received, 
and invoice approved, that requisition and order are 
“dead.” It is quite different with the recording of 
information, as this must be kept active and alive. 
It is true that some recorded data will become obso¬ 
lete, such as prices for instance, but these should be 
superseded by prices which are current and represent 


74 


PURCHASING 


the market of today. A price or quotation may be 
five years old and yet if it represents the latest market 
figure it is alive and in force. 

The accumulation of reliable records is probably 
more essential for the purchasing office than for any 
other department of a business. It is the memory por¬ 
tion of the brain of the department. A substantial 
proportion of these records can be compiled from the 
actual transactions which take place in the department 
itself, but there are other facts which are necessary 
accessories and which can be obtained from the other 
departments and from outside sources. A reference 
to Figure 7 in last chapter will make this better under¬ 
stood. 

Some offices will require much more information 
than others — it will depend on the nature of the 
business. The staff should, then, be organized to 
take care of this condition. The methods of doing 
this work will be outlined, but it must be remembered 
that in very small establishments it will only take part 
of the time of one person, while in very large ones 
several people may be engaged on the work. 

The purchasing agent should energize the movement 
and appoint some member of his staff to take charge of 
it. His personal activity will be necessary in occa¬ 
sionally visiting the sources from which he is getting 
his largest and most important supplies and other 
plants manufacturing goods of a similar nature. By 
observation and inquiries he will learn a great deal 
which will be very useful. Notes of all these points 
should be made and properly recorded on his return 
to the office. These visits of the purchasing agent 
will enable him to get some impressions and will give 


TABULATING PROPER RECORDS 


75 


him a mental picture which will be exceedingly valu¬ 
able and which could never be acquired from any data 
obtained through other channels. 

Catalogues 

It is a practice with some purchasing agents to de¬ 
cry the utility of catalogues. Certainly some of them 
do not tell one much, and if they are accompanied by a 
price list and discount sheet they are used merely to get 
a comparative price. For any purchase of importance 
an endeavor should be made to secure better figures. 
Nevertheless, it must be admitted that there comes a 
time when catalogues are perused and assiduously 
searched for some particular thing or information. 
This is the experience of both large and small buyers. 
It is expedient therefore to obtain a good library of 
catalogues which bear any relation to the character 
of the purchases. 

If one goes into any public library some good ideas 
can be obtained about storing and keeping books for 
ready reference, also the amount of space required, 
the necessary clearances, average size of books, depth 
of shelves, etc. If it is proposed to establish an 
extensive catalogue library, it would be advantageous 
to have special bookcases, shelves, and receptacles 
made. They will prove to be cheaper than extension 
bookcases and can be arranged to suit the space 
available. There are several methods of filing the cat¬ 
alogues and the best is undoubtedly to arrange them 
according to size. It will be found that they can be 
segregated into about six dimensional divisions and 
the shelves can be spaced to suit. There will be a 
great many more catalogues of the medium sizes than 


76 


PURCHASING 


of the largest or smallest, therefore more shelf space 
must be allotted to these. 

This scheme will work out somewhat as shown in 
Figure 11. All catalogues must be numbered on a la¬ 
bel pasted on the back, or if the book is not sufficiently 
large then paste it on the front in the left-hand top 



Figure No. 11. — Sketch of arrangement of shelves for catalogues. 

corner. Commence numbering the top row one and 
upwards. If it is a small case, the second row will 
commence at 200, the third row at 300, and so on. 
Larger catalogue cases can have the second row com¬ 
mence at 500, the third at 1000, etc. But perhaps a 
better way, if the collection is very large, is to com¬ 
mence the top row 4, second row 4, third row 4, etc. 
All these methods are distinctive in that they desig- 


















TABULATING PROPER RECORDS 


77 


nate which shelf the catalogue is on and it can be 
located instantly. If the shelves are exceptionally 
long, they can be subdivided by distinctive numbering 
for each section. This can easily be figured out as 
the catalogues accumulate. 

The shelves as described take care of all stiff, bound 
catalogues, but there will be also a great many pam¬ 
phlets, circulars, etc., which it will be necessary to 
keep and file. These can be placed in folders similar 
to correspondence folders, keeping as far as possible all 
printed matter on one subject in the same or adjacent 
folders. 


Material- 


Name of Manufacturer 

Address 

Shelf 

Cat. No. 










































Figure No. 12.—Card for indexing catalogues under name of material. Size 
4x6 inches. Color should contrast with card shown in figure No. 13. 


All catalogues will then have to be cross indexed, 
filing one card, as shown in Figure 12, under the ma¬ 
terial or subject index and the other, Figure 13, under 
the index “manufacturers” or “suppliers.” These two 
cards should be different colors, as this is a precaution 
against their being placed in the wrong filing drawer. 


















78 


PURCHASING 


It is sometimes found convenient to keep the drawers 
containing these index cards on the desk or within 
reach of the person using them most frequently. If, 


Name of 

Shelf 

No. 

Man’f’r. 

A 

48 

Address 


List of Material Manufactured 


Figure No. 13.—Card for indexing catalogues under name of manufacturer. 

Size 4x6 inches. 

however, the bookcase has been built specially, it is 
possible for it to be so designed as to include these 
drawers, also the drawers for folders as an integral 
part of it, making all the catalogues, pamphlets, circu¬ 
lars, and their indexes self-contained in one piece of 
furniture. See sketch, Figure 14, which illustrates 
approximately the manner in which this can be done. 

Sources of Supply 

The record of sources from which materials, goods, 
and supplies can be obtained should be revised con¬ 
stantly and kept up to date. It is not sufficient to 
keep a list of manufacturers from whom purchases 
are regularly made. They may be the ones who have 
been best able to supply requirements in the past and 















TABULATING PROPER RECORDS 


79 


are in the best position to do so at present, but 
changes are continually taking place and new manu¬ 
facturers coming into the market better equipped per¬ 
haps than the old ones. If the market seems too 
narrow or it is felt it is not broad enough for purchases 
to be made to the best advantage, then persistent 



Figure No. 14. — Sketch of book case for catalogues showing arrangement 
for filing pamphlets and circulars, with index drawers. 


endeavors should be made to obtain information to 
rectify this. Tabulate any data acquired, make notes 
from correspondence before it is filed as to character 
of goods made by concern the letter was from, also 
notes of anything salesmen say they are prepared to 
quote on or supply. A great deal of valuable informa¬ 
tion will soon be accumulated which can be collected 
on cards, if the market is assiduously searched. 





























































80 


PURCHASING 


There is a limit to this as a point is finally reached 
where the supplier is located at such a distance from 
where the material is to be consumed that questions of 
freight and time might prohibit their being considered. 
To make all the purchasing records of greatest value, 
they must represent good live buying prospects, and 
not be encumbered with useless and unnecessary in¬ 
formation. 

Some offices rely on the catalogue index cards for 
recording these data, but it is not advisable. Keep 
those cards for the one purpose only. The form of 
card needed, or the one best suited for the purpose, 
will depend on the nature of the business. A sugges¬ 
tion for a card is offered, see Figure 15. A code 
rating of one’s own can be adopted which will signify 
the financial standing of the supplier, whether he 
makes shipments promptly, whether there has been 
any trouble with his goods; in fact, all information 
that will be useful and which can be put on the card 
in an abbreviated form. 

This record of sources of supply is intended to 
furnish information not given in catalogues. It will 
keep the purchasing agent posted as to where he can 
buy cheapest and best and get treated right. A sales¬ 
man keeps himself posted as to good live prospects, 
why not the buyer? Inquiries will then reach only 
those who are keen for the business, and the quota¬ 
tions received will represent the best prices obtainable 
from the most reliable sources. Undesirable bidders 
will be eliminated when inquiries are sent out, and a 
remarkably high percentage of efficiency maintained. 


Material____ Description- 

Specification No. 


TABULATING PROPER RECORDS 


81 


9 

PS 

< 

a 

w 

M 










Cat. 

No. 










Previous Service and Reputation 

1 Financial 

Standing 










Business 

Methods 










Quality 










Shipping 1 

Promptly | 










Keeping 

Promises 










E-* 

£ 

Capacity 










Distance 










Location 










Address 










Name of M’f’r 











Figure No. 15.—Record of sources of supply showing where purchases can be made to best advantage. A card 8 x 10 
inches can be used or loose leaf ledger sheets as found most convenient. 






























82 


PURCHASING 


Record of Past Purchases 

A combination may be effected by some concerns 
in recording some of the other information. Where 
a record is kept of purchase orders, it is sometimes 
done in such a way as to analyze the heaviest pur¬ 
chases, by which the totals for the year can be 
found with the prices paid; but it is not entirely sat¬ 
isfactory, for it frequently means a complication of 
figures which do not convey clearly and concisely 
the desired information. There are many manufac¬ 
turing establishments which do not have the faintest 
conception of the quantities of each article or material 
which they buy in a year, or any given period, but 
just order in a haphazard way for immediate require¬ 
ments or when stock is low. Very little work is en¬ 
tailed in keeping a record of such purchases, and when 
the consumption for a given period is a known quan¬ 
tity, buying can be done more intelligently and to 
better advantage. It is patent to any one that if a 
purchasing agent has definite and positive information, 
such as indicated, he can face the market with assur¬ 
ance and not be buying quantities on guesswork. 
Such data also would be exceedingly valuable to the 
persons in charge of the various departments where the 
goods were used. 

A record should be kept of everything with prices 
paid. Simple forms for this purpose are shown in 
Figures 16 and 17. These can be elaborated on as 
much as necessary, so long as useful information is 
being recorded, but duplication should be avoided. 
In small establishments the stores perpetual inventory 
may be used for this purpose if it is kept in the purchas¬ 
ing office, but if not, one cannot send to the storekeeper 


Material. 


TABULATING PROPER RECORDS 


83 


Value 









PQ 

o 





| aad 





Price I 





Quantity 





Purchased from 





Order No. 





Date | 






Figure No. 16. —Record of material purchased. The object being to enable the purchasing agent to obtain from this 
record the total quantity or value of any article or material purchased in a given period. Size 5x7 inches. 






















84 


PURCHASING 



Figure No. 17.—Record of material purchased, an alternate to figure No. 16. This form gives unit cost. Both 
No. 16 and No. 17 also serve to show fluctuations in prices paid. Size 8 inches wide, length to suit. Loose leaf 
sheets can be used if desired. 

























TABULATING PROPER RECORDS 


85 


to obtain this information every time it is needed. 
The main object to be served is to have a correct 
account of the total quantity, also the total value 
purchased of each article during three, six, or twelve 
months, with the prices paid. This will give an excel¬ 
lent basis on which to estimate the requirements for 
a similar period ahead, and one can go into the 
market intelligently, obtain better prices, and arrange 
deliveries exactly in accordance with the known 
wants. The sizes mentioned as suitable for forms 
shown in Figures 16 and 17 can, of course, be changed 
to include any additional information which individual 
conditions demand. 

The Purchase Record 

A complete record of all purchases is a positive 
necessity in some establishments for financial reasons. 
The purchasing agent may be called upon at any 
time to say what the exact amount of the purchases 
is for a given period, and how much will become 
due for payment in the following month or within a 
specified time. In other places this necessity may not 
exist, but nevertheless a record should be kept. It is 
not wise for the buyer to go along placing orders, not 
knowing the aggregate value of the material and 
supplies purchased. He may not be exceeding the 
maximum allowable, and he may be buying strictly for 
the requirements of the business, but if the purchases 
are for delivery one, two, three, or even four months 
ahead, he should know the value of the transactions 
he has closed and the man in charge of the finances 
should know the exact amount of the obligations he 
has to take care of. 


86 


PURCHASING 



Figure No. 18. —Purchase record with an arrangement for analyzing the value of purchases over three months. By 
extending the width of sheet additional columns can be added for as many months as desired. 

































TABULATING PROPER RECORDS 


87 


Figure 18 shows a method of recording orders with 
a scheme for analyzing the dates of payment over 
the three subsequent months. The totals for each of 
these months can be kept in pencil figures each day 
and a summary of the three at end of the month will 
be the grand total of the purchases for that month. 
This information, also the information on past pur¬ 
chase record, would be posted from the copies of 
purchase orders in much the same way as invoices 
are posted into a ledger. 

There have been forms designed which combine the 
four following records on one sheet: 

Purchase order record. 

Invoice record. 

Stores record. 

Material price record. 

It is possible there is a business the nature of which 
would permit this to be done, but it has never come 
under the notice of the writer. The idea is to enter 
the amount of order in first column, in the second 
column a record of invoice, the third and fourth 
columns being for stores record. But such a scheme 
makes it imperative that there shall be only one in¬ 
voice for each order issued, one entry into stores, and 
the whole material delivered from stores at one time, 
because there is only one line used for each order. 
It is an impossible condition in any ordinary business, 
but is given here as a suggestion, as some might be 
able to adopt it. Generally, however, it can be 
demonstrated that separate records are very much 
better from every point of view. If too many records 
and figures are kept on one sheet they have a tendency 
to become so involved as not to be readily decipher- 


88 


PURCHASING 



0 > 

a 


Figure No. 19. —Purchase record form which can be used as a substitute for Figure No. 18. Both of these 
intended for use as loose leaf sheets and should have a margin for binding. Size 8§ inches wide. 























TABULATING PROPER RECORDS 


89 


able. Practically little additional work is necessary 
in keeping separate records. 

Record of Quotations 

The record of quotations, Figure 20, will be com¬ 
piled from various sources. Salesmen who call are 
always ready to quote prices for something they are 
interested in, but which at the time may have no 
immediate interest for the purchasing agent. A note 
should be made to go on the quotation card, also any 
prices quoted in correspondence. Even if it is some¬ 
thing not bought before, keep a record; it is a good 
thing to know prices of any article. While it is not 
to be inferred that records should be kept of goods 
which are absolutely and entirely foreign to the busi¬ 
ness one is engaged in, nevertheless the widest pos¬ 
sible knowledge of prices is valuable to a purchasing 
agent. Common-sense should determine how far to 
go in this direction. When the comparison of quota¬ 
tions card is made up from inquiries sent out, turn 
it over to the record clerk and let him post the prices 
on this form; they will be valuable for future refer¬ 
ence. It is not necessary to duplicate the record of 
prices already posted on the card of past purchases; 
that card is a record of goods actually bought. The 
quotation card should contain quotations from other 
firms for similar material, together with all other 
prices which can be collected from time to time. 

Specifications 

Standard specifications should be drawn up for all 
material used in production work, and for supplies 
of every kind and nature used around a plant there 


Description 


90 


PURCHASING 


05 

w 

PS 


H 


6 

H 

£ 








1 

Date 








Quotation 

MADE BY 








Net Cost 
Delivered 








j Freight 








Terms 








Net 

Price 








Discount| 








List 








Unit 








Quantity 










Figure No. 20.—Record of quotations. This is distinct from the record of prices of goods already purchased. 
Size of card 8x10 inches. 







































TABULATING PROPER RECORDS 


91 


should be a proper description, clear, concise, and 
worded in such a manner as to leave no misconcep¬ 
tion in the mind of bidders or suppliers as to the 
article mentioned. When this information is obtained 
and understanding^ collected for easy reference, it 
serves many good purposes. It will enable the pur¬ 
chasing agent to secure prices without any doubts 
arising among the bidders as to what is actually 
wanted, and will prevent references being made back 
to him for more definite information. The purchasing 
agent will positively know when he receives bids that 
they have all figured on the same grade of material, 
and his comparison of quotations will mean real com¬ 
petitive prices. 

This procedure will also enable the various supplies 
used in a plant to be standardized. One department 
may requisition a certain size and kind of broom, 
another department may requisition the same kind 
but a different size. It may be found that one size 
of one description will answer for the whole estab¬ 
lishment. All office furniture and stationery should 
be standardized. The furniture is then interchange¬ 
able and can be bought to better advantage. One can 
go into many large offices and find two or three makes 
of filing cabinets, whereas one manufacturer would 
have been glad to supply all that was required, and at 
a lower price than was paid for the separate purchases. 

The specifications of material used in production 
can be drawn by the engineers, based on scientific 
knowledge of what is required, and on the action of 
the material in the course of its manipulation through 
the shop and in the finished product. These specifica¬ 
tions may be short or lengthy. They should be type- 


92 


PURCHASING 


written or printed according to the frequency with 
which the orders are issued and the quantity used, 
and kept ready to send out with inquiries or orders. 
The original copy with copies of all changes, modifi¬ 
cations, or amendments should be kept in folders and 
indexed. The description of supplies can in many 
cases be condensed, and entered on the heading of the 
card recording past purchases. 

Inspection Reports; Analyses and Tests 

All reports made by the inspectors on material dur¬ 
ing progress of fabrication and before shipment to the 
buyer, belong to the division of the office having 
charge of the routine work in following up the orders; 
but these reports should pass through the hands of the 
record clerk so that he can note on his records any 
items in them which would make his information 
more complete. Some establishments keep an in¬ 
spector for examining all material on arrival at factory 
and his reports should be sifted in like manner. A 
large amount of valuable and instructive data can be 
gathered from these to be posted on the sources of 
supply record, Figure 15. A form of inspection report 
is shown in Chapter X, Figure 36. 

In construction work inspection and tests are made 
of all important purchases of material before shipment 
and where this is not done samples are taken after 
delivery, of such things as cement, steel castings, etc. 
for the purpose of analyzing and testing. Copies of 
these analyses should go to the purchasing agent’s 
office and be put on record. 

In a manufacturing plant, if a laboratory is main¬ 
tained for making chemical analyses and machines 


TABULATING PROPER RECORDS 


93 


for physical tests are available, it puts a powerful 
weapon in the hands of the purchasing agent. He 
can have recourse to these and determine positively 
that he is being supplied with what he bought. These 
analyses and tests are also exceedingly helpful to the 
engineering department and the ability to determine 
the composition and strength of materials is of 
great utility and economic value to the produc¬ 
tion department. Many manufacturers depend on 
the suppliers to make tests and suggest to them 
the most suitable composition of their raw material, 
thus placing themselves under obligations to them. 
With one’s own laboratory the experiments can be 
carried on in the plant and without outside assistance, 
which leaves the purchasing agent a free hand in 
buying. The tests made for production, engineering, 
or purchasing department should go on record in a 
similar manner to the specifications. This applies 
also to all reports, tests, or observations made on 
material and supplies during progress through, or use 
in, the whole establishment. Consistently kept up, it 
will result in a remarkably high degree of efficiency 
in securing the very best materials and supplies for 
the satisfactory and economical operation of any 
plant, and the maintenance of its product at a fixed 
standard of excellence. 


PURCHASING 


! 



From Whom Purchased 














FORM 539 1M-12-23 

Dept. 




• 











Terms 















Discount 















Price 















Date 















DESCRIPTION 









• 





o 

* 

(0 

r* 

N 

CO 

d 

z 

6 

o 

z 

K 

x 

CO 

a 

u 

-j 

_j 

o 

* 

Quantity 
















Figure No. 21.— This card 5x8 inches is used by Consolidated Gas Company of New York and serves 

as a record of prices and source of Supply Record. 


































CHAPTER IX 

Work Connected with Requisition 


Examining and Checking Requisition 

T HE requisition is in some respects the most im¬ 
portant document which comes into the pur¬ 
chasing department. It is the basis for all purchases; 
from it emanate practically all the activities asso¬ 
ciated with every purchase; in fact no purchase should 
be made without a requisition. Owing to its impor¬ 
tance it is absolutely essential it should be thoroughly 
checked and examined to enable the subsequent work 
connected with it to proceed with accuracy and dis¬ 
patch. After perusing the remarks which follow in 
regard to the preparatory work on a requisition, it 
will be fully realized how necessary it is to have the 
information records described in the last chapter in 
good shape and fully up to date. 

A form of requisition is shown in Figure 22 which 
would answer for a manufacturing establishment; for 
some kinds of construction work it is not so suitable. 
Modifications can be made in any of the forms illus¬ 
trated here as the needs of the case dictate. Whatever 
the nature of the business there must be a requisition 
for every purchase made. It may be in duplicate or 
triplicate according to the method of procedure. In 
most cases it is in duplicate, the original going to the 
purchasing department, and the copy being kept in 
the department where it originated. In such cases a 


96 


PURCHASING 


copy of the purchase order would be sent to the 
maker of the requisition. An alternative method is 
to send two copies to the purchasing department, 
where one is marked with order number, date of deliv¬ 
ery, and other particulars, and returned to the maker. 


O 


O 


PURCHASE REQUISITION 


Date- 

Required for- 

Delivery Wanted- 
Quantity in Stock- 


Req. No_ 

-&cct. No.- 

—Deliver to- 

Max-Min.. 


Approved-Signed_ 

This Space f Checked by -Spec. No_ 

for use in « Price-Terms_Order No.. 

Purch’g Dept. I Ordered from_ 


Figure No. 22. — Purchase requisition. This form is suitable for a 
manufacturing establishment and can be of a size convenient to 
describe the goods usually requisitioned. 


The former method is usually preferred as it involves 
less work. 

It is absolutely imperative that the requisition 
should be signed by some authorized person, and that 
the quantity and description of material required be 
clearly and distinctly stated; also date delivery is 
wanted. These things are indispensable in any 


























PURCHASE REQUISITION N 2 26860 «■»■<&, 


THE REQUISITION 


97 


R 

I 


Id 

t- 

< 

D 


l- 

Z 

u 

O 

< 

o 

z 

05 

< 

X 

u 

K 

D 

CL 

0 

H 



Figure No. 23. — Form of requisition used by Neptune Meter Co. Size 5x8 inches in triplicate. 















































98 


PURCHASING 


requisition; other information is necessary in some 
cases, but optional in others. Requisitions for ma¬ 
terial going into storeroom should state quantity on 
hand, maximum and minimum allowable, and for what 
purpose required. These particulars are not always 
available in construction work, but other details, 
depending on location and class of work, would be 
necessary. 

The requisitions must be numbered. If the busi¬ 
ness is a very large one with many departments, they 
can be numbered when printed and a letter placed 
before the number to distinguish the department, or 
they can be numbered as they arrive in the purchas¬ 
ing department. In the latter case the copy kept by 
the department making the requisition can have its 
number inserted when they receive copy of order, as 
it will appear on that. 

Requisitions for some materials and always for 
supplies should be made at regular and stated inter¬ 
vals. This will enable the purchasing agent and store¬ 
keeper to keep better track of the quantities being 
used, will enable the purchasing agent to buy fixed 
quantities at stated periods, and will simplify the work 
of both offices and make the course of procedure 
easier. 

All requisitions should, if possible, go through the 
purchasing agent’s hands. In some offices this is not 
feasible owing to the large number of requisitions 
which come through for small items. These can be 
dealt with by an assistant, but the more important 
requisitions should have the personal attention of the 
head of the department. All requisitions will first be 
examined to see whether they have been signed by 


THE REQUISITION 99 



i 




} 

o 

l 


> * 

1 


Figure No. 24.—Form of Requisition used by Nichols Copper Co. Size 8 x 11 inches. This is] 
in triplicate and embodies a complete history of the purchase. See reverse side of requisition 
on next page. 






















































































100 


PURCHASING 



< « 


jre No. 25.— On the back of requisition (Figure 24) a record is made of quotations obtained 
and a space is provided for the signature of the person in the department placing the order. 
This information only appears on that copy of the requisition retained in the Purchasing 
Department. 


































THE REQUISITION 


101 


some person with the necessary authority to do this. 
A list of the persons authorized to make requisitions 
should be kept in the department. They must then be 
checked with production order and with the maxi¬ 
mum quantity or amount the purchasing agent is 
allowed to order. They should then be compared with 
record of past purchases. The object of this being to 
ascertain the quantity used in a given period, and to 
determine whether they should be bought in larger or 
smaller quantities. In this connection the unit cost 
of delivery has to be considered. The purchasing 
department is not a commission house and some lati¬ 
tude must be allowed it. Always, however, strictly in 
conformity with the known requirements of the 
business. 

It will also be necessary to see that the material 
is properly described or specified, and if necessary a 
copy of the standard specifications must be attached 
to the requisition. It has already been pointed out 
that standard specifications and proper descriptions 
are very essential, in fact they are indispensable to 
good buying. 

Pricing Requisitions 

It may be found that the requisition is for material 
for which a price has been agreed for a fixed period 
with a supplier, also terms and time required for de¬ 
livery. In such cases the order can be made out at 
once, provided the requisition has passed the prelimi¬ 
nary checkings and examinations satisfactorily. 

Frequently arrangements can be made to have the 
material carried in stock by the manufacturer and 
taken as required by the purchaser. The prices 


102 


PURCHASING 


O 


O 


Form E M < !-M CM 


WARNER SUGAR CORPORATION 
EDGEWATER, N. J. 


REFINERY REQUISITION 


REQUIRED < 
FOR | 


Charge. 


..19 


no c..12.8.7. 


DEPARTMENT REQUISITION 
SIGNED BY' 


Make Order To- 


Approved: 


O. K. 


Purchasing AGENT 


Figure No. 26. — Form of requisition used by Warner Sugar Corporation. 

Size 8x9 inches. 







































THE REQUISITION 


103 


would of course have been arranged to cover a period 
of probably six or twelve months, the buyer being 
protected on an advancing market, with the benefits 
of a declining market accruing to him. It may look 
as if the seller is taking big chances of making losses 
instead of profits, but it is an economical possibility 
for such business to be done with advantages for both 
sides, and probably all good purchasing agents secure 
in some way the benefits of this form of buying. 

In determining whether the quantities requisitioned 
should be increased or decreased, there are many 
factors to be taken into consideration. The larger 
quantity might be bought cheaper with lower trans¬ 
portation charges, but against this must be balanced 
the disadvantages of stocking too much material and 
the losses it would entail in unremunerative invest¬ 
ment, additional insurance, <space occupied, possible 
depreciation, etc. There are many other considera¬ 
tions also to be carefully weighed which were gone 
into fully in previous chapters. 

Obtaining Quotations 

When a requisition covers material for which there 
is no agreed price with the supplier, or when the price 
agreement expires, new quotations must be obtained. 
For this purpose a form similar to Figure 27 can be 
used. Reference should be made to the sources of 
supply card already described, and the inquiries sent 
to as many firms as are necessary to get the lowest 
prices, best material, and suitable delivery. A copy 
of this inquiry with a fist of all people it was sent to 
must be kept with the requisition until finally disposed 
of. 


104 


PURCHASING 


JOHN DOE & COMPANY 
360 Cannon Street 
New York City 


191 


To. 


Please quote on this sheet in space indicated below for the articles 
described. If you are unable to furnish same in accordance with our 
description and wish to offer a substitute, please give full details. 

This inquiry is in duplicate, original must be returned to us properly 
filled out, duplicate to be retained by you. 

No charges will be allowed for packing or cartage, 

This is not an Order. 

Quotations must be in - 

this Office by- Purchasing Agent. 


Item 

Quantity 

Description 

List Price 

Discount 

Net Price 










To John Doe & Company. 


We quote you as above F.O.B_Shipment can be made 

in-days from receipt of order. 

Terms-- 

Date- 

Figure No. 27.—Form of inquiry for obtaining quotations. Regular 
letter head size. 



























THE REQUISITION 


105 


S1S-5M t-20 

REQUISITION ON PURCHASING DEPARTMENT 

Richmond Radiator Company 


No. 


We wiJl need. 


by 


(NAME) 


(WHEN) 


(ROUTE AND FREIGHT OR EXPRE3S) 


Plant or Branch- 


Account No.- 

-the following:. 


(DATE) 


SPECIFICAT 


O N S 


DATE OF STOCK 

COUNT ON HAND 


Goods to be used for 
REMARKS: 


Date Ordered.........-- 

Order Ns~........... 


Richmond Radiator Company 


THIS SPACE IS roa PURCHASING DEPARTMENT'S MEMORANDA. 


N. B— BE EXPLICIT. GIVE FULL INFORMATION AND DETAILS 


Figure No. 28. — Form of requisition used by Richmond Radiator 
Company. Size 8 V 2 x 11 inches. 





























106 


PURCHASING 



Figure No. 29. — Requisition for general supplies used by Consolidated Gas Company. Size 8% x 14 inches. 












































THE REQUISITION 


107 


Form Uf-MW-MA-H 


PURCHASING DEPARTMENT 

NICHOLS COPPER COMPANY 


IN REPLY REFER TO QUOTATION 
INQUIRY NO. .— 


LAUREL HILL 

•OflOUOH OF OUE8N8 

NEW YORK 


TtUtFHONt 

T lOHUNUn* FOINt 


M 


Please quote us on the material listed below. To insure your 
quotation being given attention you are requested to comply with 
following points. 

A separate price must be given for each item. 

A definite delivery date must be named. 

State whether prices are F. 0, B. shipping point or destination. 
This quotation is wanted by- 


H. B. TWYFORD 

Purcbulal 


Figure No. 30. — Form used by Nichols Copper Co. for obtaining quo¬ 
tations. Size 8 V 2 x 11 inches. These bear the same number as the 
requisition on which they apply, rendering their identification with 
it very easy. 







108 


PURCHASING 


Tclepb o — Stuyvesant 4909 


A. F. MACKUM 

PuiruutiKS Aoon 


J, M. Knowles 


REQUEST FOR QUOTATION 

Ghmaolihalrh (Saa GUmtpany of $fou fork 

PURCHASING DEPARTMENT 

130 East 16th Street, New York City 

r i 




U 


_J 


Goatlew>ea: 

Please quote prioe for which 70 a will finish tlx foDowiaf material DEL1VEBKP 

»t Dep’t 

This Company reserves the right to accept aD, or part, or to reject the entire bid. No packing or delivery charges will be allowed, unless it 
Is so provided in the quotation. Your prompt reply will oblige 

CONSOLIDATED GAS COMPANY OF NEW YOBS 

Beq. No_ 


THIS IS NOT AN ORDER 


Purchasing Agent 


QUANTITY 

MATERIAL 

PRICE 


THE UNDERSIGNED AGREES TO FURNISH AND DELIVER F O B. DESTINATION. SUBJECT TO THE 
CONDITIONS STATES ABOVE, THE FOLLOWING MATERIAL. AT PRICES QUOTED HCRSCNr- 




The above material can be delivered within_— ...... days Terms_discount for cash_days 

, -.. 192- Signed 


Figure No. 31. — Request for quotation used by Consolidated Gas Coni' 

pany. Size 8% x 11 inches. 
























THE REQUISITION 


109 


4M Torn J63A 4-9-24 

TELEPHONE REQUEST FOR QUOTATION 

File_. 


QUANTITY 

MATERIAL 










































































































FOB 





Cash Discount 










Order By --lo. 

BSMAR tCS ---- 


Figure No. 32. — Telephone request for quotation used by Consolidated 
Gas Company. Size 8 V 2 x 11 inches. 





















































no 


PURCHASING 


When these quotations arrive in the office, they 
should be entered on a card or sheet similar to 
Figure 33. It may be found more convenient to enter 
the names of all the people who have been invited to 
tender on this card at the time the inquiries are sent 
out. It can then be readily seen when all the quo¬ 
tations are in. These quotations will have to be very 
carefully considered and analyzed and scrutinized 
from all angles; questions of freight and time of de¬ 
livery must be taken into account, as well as the 
reputation and past performances of the bidders. 
There may be substitutes offered which deserve in¬ 
vestigation. Having weighed all these matters care¬ 
fully and everything else being equal, the question 
of price should be the deciding factor. All of these 
points would of course be passed upon by the pur¬ 
chasing agent himself, the comparative statement of 
the bids having been drawn up and submitted to him 
by the price clerk. 

Final Negotiations 

It may be necessary at this stage, if the order is an 
important one, for the purchasing agent to interview 
some of the bidders in reference to certain phases 
and details of their quotations, which will enable him 
possibly to obtain better terms, arrange shipments 
to fit in accurately with the known requirements, 
and in doing this make it easier for the financial 
department. 

When formal invitations have been sent out asking 
for quotations, then letters of declination should be 
sent to unsuccessful bidders. Business courtesy de¬ 
mands this, and time and trouble can be saved by 


COMPARISON OF QUOTATIONS 

Material_Date_Req. No. 


THE REQUISITION 111 


Previous 

Service 


fc 


o 


H 


-0 


H 


0 


Ph 


a 


Ph 


H 0 


z a 

s 

a h 


S g 
So 


S3 « 


COPh 

: : : : 

H 


K 


fc 




a 


o 


a 


« 




0Q 


s 


« 


a 


H 


a 


o 


S 


Ph 


a 


s 


<3 


fc 


00 


« 


a 


Q 


a 


« 



o 

£ 

« 

Q 

« 

o 


H 

H 

<1 

Q 


H 

H 

b-4 

£ 

a 

m 

o 

< 

« 

w 

Q 


fc 

O 

m 

«! 


« H 
O P$ 


Figure No. 33.—Comparison of quotation card. Size 6x8 inches. 





























112 


PURCHASING 


doing it. Neglect in notifying bidders imposes on 
the purchasing agent or department the necessity of 
answering by telephone and correspondence questions 
regarding quotations which have long since been 
disposed of. 


JOHN DOE & COMPANY 
360 Cannon St. 

New York 


To. 


Gentlemen, 

Referring to your quotation of- 

for- 

we have to advise you that we have been able to obtain more favorable 
figures than those named by you, and the order has been placed. 

Thanking you for the attention you have given the matter, we are 
Yours very truly, 

John Doe & Company. 


Purchasing Agent. 

Figure No. 34. —Form of circular letter notifying bidders that the order 
has been placed. 


If all the features leading up to this stage of the 
transaction are reviewed, it should reveal a situation 
in which the purchasing agent can be positive he is 
in a position to close it on the most favorable terms 
and conditions possible. Starting with his sources of 
supply record, if this has been kept up in good shape, 
he knows that the people he has asked for quotations 









113 


THE REQUISITION 

are the very best in the country to furnish him with 
what he wants, he knows they are in a better position 
to quote him favorable prices and to give him best 
service. He has arrived at this conclusion by a proc¬ 
ess of selection and elimination. He knows his speci¬ 
fications have been correctly and accurately drawn. 
He knows from his records of past purchases and 
future requirements the exact dates on which he must 
have delivery, and having arranged terms and 
method of payment he can confidently close with the 
assured feeling that he has done his very best, and 
brought the negotiations to a successful conclusion. 

In concluding this chapter it is desired to call 
attention to the various requisitions illustrated. 
There are features in each of these which can receive 
the careful consideration of the student. Emphasis 
is laid on the fact that the requisition must have the 
approval of some constituted authority before action 
is taken on it by the purchasing department. 


CHAPTER X 

Work Connected with Orders 

T HE fundamental difference between a requisi¬ 
tion and an order is that the former is for use 
within one’s own organization and carries no obliga¬ 
tion to another concern whereas an order may be a 
very serious contractual obligation. This fact must 
never be disregarded. Its legal aspects will be dis¬ 
cussed in a later chapter. 

Method of Handling 

The order form varies considerably, in fact it would 
be difficult to find two with exactly similar wording, 
but there are essential features in all which are in¬ 
tended to convey the same interpretation. Figures 
35 and 36 show forms of orders which will be found 
suitable for many concerns. In filling in the body 
of the order it should be stated definitely, clearly, and 
concisely what is required. If a lengthy specification 
is necessary, then it should be referred to by a dis¬ 
tinctive number or letter and date, and a copy at¬ 
tached to the order. Any drawings, blue prints, or 
sketches should likewise be quoted, and they should 
accompany the order. If it is an order for some minor 
supplies, such as twine or wrapping paper, specify 
exactly what is required. The proper description of 
all the standard supplies should be on file and should 
be referred to. A great deal of time may be saved 
by doing this. A manufacturer would probably have 
several grades or kinds, all of which might come 


WORK CONNECTED WITH ORDER 


115 


under an incomplete description, which means that 
information would be requested as to which was re¬ 
quired, and consequently delay would occur. 

Some orders are sent out with an attachment for 
acknowledgment, but this is not recommended. It is 
treated in a very perfunctory manner. It is probably 
better to enclose a post-card (see Figure 43), as this 
scheme gets more recognition and can be used to 
obtain a promised date of shipment. Another good 
purpose served is that the post-card, being the same 
size as tickler card, can be filed with it in the 
follow-up file. The whole story of acknowledg¬ 
ment and promises regarding the order are then kept 
together. 

Several copies of the order have to be made. Some 
use a card for the copy to be kept in the purchasing 
office, but if the card is stiff it does not give satis¬ 
faction in the typewriter and a good impression is 
not obtained. A copy is usually sent to the depart¬ 
ment which made the requisition, sometimes a copy 
to the storekeeper, and sometimes to the accountant, 
depending on the methods in vogue. The printing on 
all copies need not be the same, but they should 
register and the spacing should be arranged to suit 
the typewriter, as this saves considerable time. All 
copies should be distinctive as to color, as this facili¬ 
tates distribution and prevents any mix up. 

The example given of an order form (Figure 35) is 
numbered in the right-hand top corner, as it is in¬ 
tended to keep the office copy in a post binder, and 
in this position the number is more readily seen. The 
numbering should be done when printed and should 
be in large, bold figures. A few extra order sheets 


116 


PURCHASING 


with numbering omitted can be kept on hand for 
use in replacing spoiled sheets so that there is no 
break in the numbering. The margin on the left 
would in the copies be blank and perforated for 
binding. If it is not desired to have the price ap¬ 
pear on any of the copies, it can be omitted by in¬ 
serting a slip when the order is being written, or using 
short carbons. 

Before mailing the order, it should be checked. A 
stenographer may add a cipher making it read 2000 
instead of 200, or make an error in the size of an ar¬ 
ticle, the consequences of which might be serious and 
involve the concern in heavy financial losses. 

Having got rid of the original, the copies can be 
sent out to the departments interested. The requisi¬ 
tion which would have been in use until now, can be 
permanently filed away. A post binder is best for 
this purpose; it enables a large number of them to be 
kept in compact form and easy reference can be 
made to them at any time. The order number should 
be inserted on the requisition and the requisition 
number on order. The copy of order remaining in 
the purchasing department should be filed in a similar 
way, but it will be temporarily placed in the “live” 
file of uncompleted orders and later transferred to 
the permanent file when complete deliveries have 
been made. 

Immediately the order is sent out, the purchase 
order record must be posted from it, also the record 
of past purchases and prices. Both of these opera¬ 
tions have been described in a previous chapter and 
illustrations given of some forms suitable for the 
purpose. 


WORK CONNECTED WITH ORDER 117 
Following up Orders 

If an order has been placed under the most favor¬ 
able conditions as to price, terms, and date of ship- 




.s « 
a % 

% § 


C C 

o .2 

I s 

a 2 

& 2 

* g 

1 a 


s 


JOHN DOE & COMPANY 
360 Cannon St., New York City 


Date-Req. No.- 

To_ 

Address- 

Please ship to- 

Shipment to be made- 


Purchase Order No. 3047 


-via- 


Price 


Terms. 


Purchasing Agent. 


Figure No. 35. —Form of order. 

















118 


PURCHASING 


ment, still the whole economic value of the purchasing 
department might be lost if the goods were not de¬ 
livered on time. If they were for a factory, it might 


JOHN DOE & COMPANY 
360 Cannon Stbeet 
New York 


Date. 


Req. No.- 
To_ 


Purchase 
Order No. 


Please send us the undermentioned goods : 

Shipment to be made-via- 

Acknowledge receipt of this order stating whether you can ship on date 
named. 


Important 

Invoices must be rendered 
in duplicate and bear 
above order No. 

Purchasing Agent. 


Figure No. 36.—Form of order as a substitute to Figure No. 25. 













WORK CONNECTED WITH ORDER 


119 


m N. T. o. II I -IS 14 1CM M 

Warner Sugar Corporation 

PURCHASING DEPARTMENT 


79 WALL STREET. NEW YORK. 

PHONE 1600 BOWLING GREEN 


M 


PURCHASE 
ORDER N*. 


F 8102 


PLEAS« FURNISH THE FOLLOWING MATERIAL. CONSIONCO TO DESTINATION GIVEN BELOW. IN ACCORDANCE WITH 

CONDITIONS GIVEN ON BACK OF THIS ORDER. WHICH, WHEN THIS ORDER IS ACCEPTED 
BY YOU, WILL CONSTITUTE PART THEREOF. 


QUANTITY 


ARTICLE 


THIS OftOBR IS PLACED CONTINGENT UPON TNC ARTICLES CALLED EON HEREIN. HAVING MEN MANUFACT¬ 
URED OR PRODUCCO IN A PLANT OPERATED IN ACCORDANCE WITH THE U. • CHILD LABOR LAW OP SEPTEMBER 
1BT. ISIS. ALL INVOICES MUST BE STAMPCO WITN THE PORM OF CUARANTT PRESCRIBED BY THE FEDERAL 
BOARD OR THEY WILL NOT BE PASSEO FOR PAYMENT. 


PRICE 


CORRECT 


wanted:_ 


TERMS OF DELIVERY 

« IP YOU CANNOT FILL 
} THIS ORDER BT THIS 
.....f OATS ADVISE AT ONCE 


F. O. B. 


WARNER SUGAR CORPORATION 


Purchasing Agent 


SHIP VIA 


and 


WARNER SUGAR CORPORATION 

PURCHASING DEPARTMENT 
79 W»ll Strsot. Nsw York 

We acknowledge receipt of your order dated-19— 

accept all the conditions imposed therein, and will ship all materials 

__192 


...and numbered F 8102 

enumerated in said order on 


Date. 


THIS ACKNOWLEDGMENT TO Be SlCNEO IN INK BY THE PERSON AUTHORIZED TO ACCEPT ORDERS FOR THE INDIVIDUAL. 
FIRM OR CORPORATION FOR WHOM THIS ORDER IS INTENDED ANO TO BE RETURNED TO US PROMPTLY. 


Figure No. 37. — Form of order used by Warner Sugar Corporation 

Size 8 V 2 x 11 inches. 































120 


PURCHASING 


CONDITIONS 

QUALITY: 

All materials furnished must be the best of their respective kinds, and will be subject 
to our inspection and approval at any time within thirty days after delivery. If not up 
to specifications they will be held for disposition at your risk and expense. 

QUANTITY: 

The quantity of material must not be exceeded without our permission in writing being 
first obtained. 

DELIVERY: 

This order will be subject to cancellation, at purchaser’s option, if delivery is not 
effected within the time stated on this purchase order, unless prevented by unforeseen cir¬ 
cumstances and delays beyond your control. 

ROUTING: 

All material must be forwarded by the particular route named, otherwise the difference 
in freight and extra cost of cartage will be charged to your account. 

BILLS: 

Itemized bills in duplicate giving the correct purchase order number must be sent at 
time of each shipment accompanied by a copy of the manifest and bill of lading, other¬ 
wise we cannot prevent delays in payment of your account. 

DRAFTS: 

No draft for purchases made by this company will be honored. 

CARTAGE: 

No charge will be allowed for cartage, packing or reels unless by special agreement. 
STATEMENT: 

Send statement of account the first of each month. 

NOTICES: 

A notice must be sent to us as soon as material has been forwarded on account of this 
purchase order, giving number of order, kind of material, shipper’s name, car number and 
initials, and route by which forwarded. 

DISCOUNT: 

Show cash discount on invoice. 

The above are the conditions printed on the re¬ 
verse side of Figure 37 (Warner Sugar Corporation 
order). In connection with this order the following 
is quoted from the remarks of Mr. J. R. Pels who 
designed it. 

“ I really take a little pride in the order form which we have compiled 
from experience derived from a good many years of purchasing and I think 
it is as nearly law proof as any that can be gotten out. 

When the recipient of the order signs the slip at the bottom of same 
and returns it to us, we have a legal and binding contract with him which 
he cannot get away from. In the conditions on the reverse side of the 
order, under the heading “ Deliveries,” we were compelled to add the 
“ Circumstances and delays beyond Seller’s control ” clause as before that 
time nearly every order was returned to us. It, however, gives us some 
legal standing regarding deliveries which we formerly did not have. The 
New York Office copy, as you will note, is an exact duplicate of the origi¬ 
nal and has on the reverse side space for entering deliveries on the order. 
We place the acceptance slip received from the seller on this New York 
Office copy which, therefore, makes it an acceptance of our order and 
compels the seller to make delivery. We are very particular to see that 
this acceptance slip is returned to us properly filled in.” 


WORK CONNECTED WITH ORDER 


121 


PImm return thlt acknewledgment U 

Consolidated Gas Company of New York 

PURCHASING DEPARTMENT 

130 East 15th Street 
New York City 

^ 0rd " "*• 42829 Delivery will be mad*, subject to eend 


Sl*n*4_ 



I * 

N s 

! 

lip 

f 

! i 

Pi 

1 

1 

ol 

P 

rT 

O 

S* 


S >“ 

uh 

* s i! 


*ISB 
j il 


S° p 5 a 

5 

I oo I 
^5 fV> S 

CD S 


£ 


Figure No. 38. —Size 8% x 11. Six carbon copies are made of this 
order, two copies being retained in Purchasing Department, one for 
permanent record and one for price recording. One copy goes to 
Accounting Department and three to Receiving Department. 






































122 


PURCHASING 


Richmond Radiator Company 


1460 BROADWAY Cor. 42nd ST. 
NEW YORK 


ORDER 29241 


PLEASE SHIP 
TO 


VIA 


(NAME OP PLANT MUST SHOW ON ADDRESS) 



We reserve the right to charge to you any costs resulting from your failure to comply with the instructions on this 
order. 

Orders subject to cancellation, at our option, in case of strikes, fires or conditions beyond our control. 

Richmond Radiator Company 


order29241 ........ 

Afni 


Figure No. 39. — Order form used by Richmond Radiator Company 

Size 8% x 11 inches. 











WORK CONNECTED WITH ORDER 


123 


Farm U-SM-4-24 

Neptune Meter Company 

MANUFACTURERS OF 

TRIDENT WATER METERS 

TRIDENT-DISK TRIDENT-CREST 

TRIDENT-COMPOUND TRIDENT-PROTECTUS 


Date - -- . 

Name 

A ddress ---- 

Ship to NEPTUNE METER CO. 

Jackson Ave. and Crane St, Long Island City, New York ■ 

Shipping Directions --- - 

Please furnish the following articles and send Invoice and Shipf 
each consignment. 

Note on each Invoice order and requisition numbers. 

This ord«r must not be filled at higher prices thanlast quoted or charged. 
Freight or expressage to be prepaid unless by special agreement before shi| 
No attention will be paid to bills for Supplies furnished without a written 
Payments are made by vouchers only No drafts for purchases made by th 
Separate bills must be made for each order 

This order must be filled by date promised, or It may be cancelled without 

This number must be placed on 
each package and invoice. 

J. SHIPMAN. 

Purchasing Agent- 

Order No. 25907 

Requisition No.—--— 

ring Receipt or Bill of Lading ft 

without advice. 

iroent is made. 

rder from Purchasing Agent. 

s department will be honored. 

further notice. 

r 

QUANTITY 

SIZE 

DESCRIPTION 

PRICE 

































N. B - 

Acknowledge receipt of thi* order and adeiae when ahipment will be made. 

Render Invoice in duplicate and mall to Purchasing Agent, 192 Jackson 

Avenue, Long Island City, N. Y. 
i'^Sh Statement first of each month. 

NEPTUNE METER COMPANY, 

iMT By - 

W ear Vurc hosing Agtnl 

(Detach and return this acknowledgement by return mail.) 

NEPTUNE METER CO. 

Purchasing Department, 

192 Jackson Ave , Long Island City, N. Y. 

Your Order No* _ _ _ is received and accepted; will ship material as 

ordered or, or before -- 192 

Signed 


Figure No. 40. — Order form used by Neptune Meter Company. 
Size 8 Y 2 x 11 inches with a detachable slip for acknowledg¬ 
ment, 2 % x 8 V 2 inches. 






































124 


PURCHASING 


M 


PURCHASING DEPARTMENT 

NICHOLS COPPER COMPANY 

LAUREL HILL. 

•OftOUOM OF OUltNt 

NEW YORK 


I Order No. 27526_ 

Do ■« (til to pat •krr* •«» 

••■4 lavoice cad duplicate to tliU 
office u coon «• ihipotflt L node. 

If d«H»*rr b*i bees promised from 
•took It eui K« n mod# tad !#• 
w i n d complete. 


lUqeisitioe N#. 
M No. 


PLEASE DBUVM TO 


Pricc__Term*-.— 

P. 0. B._Ship via_Wanted-- 

nichols coppbe co. 

NrOnOS Ajeeu 

Pormlto. 3S0. 1-24 


Figure No. 41. — Order form used by Nichols Copper Company. Size 

8 % x 8 V 2 inches. 


PURCHASE ORDER NO. 11453 Vulcan 
REQ. NO. 

TO 

ADDRESS 



WM. M. CRANE COMPANY 

18-20 EAST 4 1ST ST„ NEW YORK 
DATE 


SHIP TO 


QUANTITY 


ARTICLE 


1 


VIA 


s 


s 


/fleeted* mutt be rendered in duplicate Wit M. CRANE COMPANY 

All communication* mutt be addressed to 
10-20 EAST 41rr. ST. NEW YORK 

ORDER NUMBER MUST APPEAR ON ALL PACKAGES FURCHASING AGENT 


Figure No. 42. — Order form used by Wm. M. Crane Company. Size 

5% x 8% inches. 




















WORK CONNECTED WITH ORDER 


125 


have to work overtime to complete a contract or 
perhaps lose it altogether, and in construction work 
the non-arrival of material of only one class might 
delay the work of every class of mechanics. It is 
very important therefore that this phase of the work 
receives close attention. There are many schemes 
in vogue for taking care of it. A good one is given 
here and suggestions regarding others. A tickler 
system, to be efficient in securing results, must be 
prosecuted with energy. It comes into being with 
the placing of an order, has a short and vigorous life, 
and dies when shipments on order are completed. 

Date- 


This acknowledges receipt of your Purchase Order No.. 

Dated-For- 

Shipment will be made- 


Signed- 

Figure No. 43.—Post-card to be enclosed with order to secure an 
acknowledgment. Size 4x6 inches. 


Tickler Systems 

Many concerns send out with the order some form 
of acknowledgment which usually contains a space 
in which a promise can be inserted regarding ship¬ 
ment as already suggested (see Figure 43). It may 
be advisable in some cases to send a copy of the order 
with the original and have an acceptance indorsed 
on its face. In any case the date of shipment should 









126 


PURCHASING 


be recorded on the tickler card, Figure 44. This card 
should then be placed in the tickler file under the 
date goods should be shipped, or in advance, to en¬ 
able a clerk to send a notice to the party holding the 
order. The date should be noted on copy of order 
to insure locating the card promptly. 

If these cards are kept in force, no shipment dates 
can be overlooked, because they come up automati¬ 
cally each day. Under the space headed “ nature of 
tickler” or “promise” a memorandum should be made 


Name-Date -No. 


Date of 
Promise 


Nature of Tickler or Promise 


Figure No. 44.—Tickler card for following up orders. Size 4x6 inches. 

of each inquiry sent out regarding the order and each 
reply. This obviates looking up correspondence. 
Some purchasing departments keep a tickler system 
by using thirty-one pigeon holes, one for each day 
in the month, and placing the cards or an additional 
copy of the order in them, but the file system is pref¬ 
erable. It can be made to cover as many months as 
desired, takes up less space, and is more convenient. 
When an order is completed the card is of no further 
value and can be destroyed. 













WORK CONNECTED WITH ORDER 


127 


Another scheme for a tickler system is to have an 
additional copy of the order made and file it in a date 
file, such as already described, sufficiently in advance 
of the actual date of shipment so that a follow-up 
notice can be sent to shipper in time to insure its 
dispatch on the specified date. This extra copy need 
only be made of those orders on which a follow-up is 
necessary, and it can have special rulings on back if 
desired for the purpose of noting promises regarding 
shipments. If the card system is not adopted this 

To- 


Gentlemen, 

Our records show that you have our Order No_ 

Dated--Calling for- 

Please advise when shipment will be made using return portion of 
this card. 

Yours very truly, 

Date- -- 

Figure No. 45.—Reply post-card to obtain promise as to date of shipment. 

scheme will be found excellent; it dispenses with the 
work of making out the tickler card and all informa¬ 
tion regarding the follow-up is self-contained on the 
copy of the order which is a great advantage as with 
the card system there is sometimes a necessity to refer 
back to the order. 

It is necessary to remind the seller of the approach¬ 
ing date of shipment. Some orders are so important 
that inspectors have to be on the ground and report 
progress. In other cases a strong letter from the pur¬ 
chasing agent is sufficient, but for the ordinary run 
of orders a printed form will probably answer the 









128 


PURCHASING 


purpose. It can be simply a request for date of 
shipment or worded imperatively as occasion de¬ 
mands. The reply post-card scheme brings very good 
results (see Figure 45), and an advantage connected 
with this is that the reply hah of the card can be filed 
with the acknowledgment card, Figure 43, and the 
tickler card, Figure 44, thus keeping all cards together 
pertaining to following up the order. 

If it is desired to send out a printed letter form of 
inquiry regarding shipment, something similar to 
Figure 46 is suggested. This would answer the pur¬ 
pose for those concerns who object to the use of post¬ 
cards. If a form similar to this is used it can be 
done in conjunction with the scheme outlined above 
for using a copy of the order for the tickler system. 
By having the form shown in Figure 30 the same 
size as the order it can be filed with it which is a 
great advantage. 

Recording Shipments 

There are innumerable schemes for recording ship¬ 
ments made against an order. The best for any par¬ 
ticular case will largely depend on the nature of the 
orders themselves. If they are mainly for articles 
which will be dispatched in one shipment, it is easy 
to arrange the copy of the order, which remains in 
the purchasing agent’s office, with a space on the face 
of it which can be used for recording the shipment. 
But where the orders are mostly for large quantities 
and the execution of them involves many shipments, 
the back of the copy of the order can be ruled for 
keeping the record (see Figure 35 in next chapter). 
It is of great importance to obtain prompt advice 


WORK CONNECTED WITH ORDER 


129 


of these shipments and have the traffic man follow 
them up, particularly in those cases where a manufac¬ 
turing establishment is not carrying a heavy stock of 
raw material, but working on a very close margin. 

JOHN DOE & COMPANY 
360 Cannon St. 

New York City 


To. 


.19 


Please advise us immediately when you will make shipment of our 

order No_dated-using space below for reply. 

Yours truly, 


Purchasing Agent. 


Note.—I f whole or partial shipment haa been made give particulars of same. 


Date_ 

The material referred to on above order will be shipped on. 

from-via- 

Remarks : 


Shipper. 

Figure No. 46.—Request for information as to shipment of an order. 
Size should be the same as the copy of order with which this will be 
filed. 




















130 


PURCHASING 


123456789 M . U ,02 13 
PURCHASE ORDER NO. Al'iOo 

REQ. NO. 

TO 

ADDRESS 


14 15 16 17 18 19 20 21 22 23 24 25 26 27 2# 29 30 31 

Vulcan wm. m. crane company 

18-20 EAST 41 ST ST., NEW YORK 
DATE 



SHIP TO VIA 


INQUIRY 

REPLY 

DELIVERY 

PROMISED 

DATE OF 
BILL 

QUANTITY 

INVOICE 

NUMBER 

DATE 

RECEIVED 

QUANTITY 

. —-... ■ 

RECEIVING SLIP 
NUMBER 











Figure No. 47.— This is a flexible card the same size as Wm. M. Crane 
Company order form Fig. 42, bears the same number, and the partic¬ 
ulars on the heading are filled in at the time the order is made out. 
It is used for follow-up purposes, recording invoices and shipments. 



Figure No. 48. —Reverse side of the copy of Nichols Copper Company 
order retained in Purchasing Department and used for follow-up 
and recording invoices. 
































WORK CONNECTED WITH ORDER 


131 


In these cases the supplies must come in regularly 
and promptly. There are also certain raw materials 
which from their nature cannot be carried in stock any 
great length of time, and frequent and regular de¬ 
liveries are necessary. When the information regard¬ 
ing a shipment has been properly recorded in the 
purchasing office, the advice or a notification of it 
should be turned over to the traffic man and to the 
storekeeper or receiving clerk to enable them to take 
care of their duties in expediting delivery and in re¬ 
ceiving and arranging storage. Frequently the ship¬ 
ping advice, invoice, and bill of lading will all come in 
together. 

After all material has been received as called for on 
the order, and the invoices have been checked against 
it, it should be withdrawn from the “live” file and 
placed in the completed or “dead” file. The orders 
can be kept indefinitely for reference at any time and 
owing to the manner of fifing them very little space is 
required to store several thousands with their accom¬ 
panying requisitions and other records connected with 
them. 

The method outlined will fit with modifications a 
great diversity of businesses whose activities are 
widely different. There are some, however, in which 
the procedure would have to be varied from that 
described. Take for instance a concern which issued 
comparatively few orders, but each order involved 
considerable correspondence and there was a large 
accumulation of papers in connection with each one. 
In such a case it would not be advisable to scatter the 
correspondence and reports through the general file, 
but all of the documents connected with the order 


132 


PURCHASING 



Figure No. 49. — Copy of order of Consolidated Gas Company sent to receiving depart¬ 
ment for the purpose of checking receipt of material. 















WORK CONNECTED WITH ORDER 


133 


Term ■ M UU4 M* 

WARNER SUGAR CORPORATION 

EDGEWATER. N. J.. . ._ .. — . - - — 

We have this day received in good condition goods as called for in the 
following requisitions and orders. 

Signed-. . . . . .. . 

Req. No. 

Order No. 

MATERIAL RECEIVED 

By whom delivered 


















































































































Figure No. 50. — Form used by Warner Sugar Corporation for reporting 
receipt of material. Size 8Mi x 11 inches. 






































134 


PURCHASING 


should be collected in a folder, including copy of order, 
comparison of quotations, etc. It would be found 
that reference to such papers would be much easier 
if kept in this way. 

Emergency Orders 

Even in the best regulated establishments there will 
be occasions when orders have to be given for material 
and supplies without going through all the various 
procedures usually regarded as necessary and prudent 
and which are outlined in this chapter. No amount 
of foresight on the part of the purchasing agent is 
a protection against a lapse by a member of some 
other department to remember something. A break¬ 
down in the shop or an accident to, or failure of some 
material being fabricated may be the occasion of 
rush orders. If there is no time to obtain quota¬ 
tions a well organized purchasing office can confi¬ 
dently issue an order, knowing that the complete and 
authentic records which are in the office will enable 
the clerk who checks the invoice to do so intelligently 
and not approve it unless a fair price is charged. 

In such cases as cited in last paragraph it is the 
practice of some purchasing agents to send a form 
letter to the party with whom the order is placed 
asking them to name the price. On receipt of this 
the regular official order is issued. This enables the 
order clerk to insert the price on every order issued, 
which is a regulation strictly adhered to in some 
offices. Probably, however, the material would be 
shipped before price was received and it is no protec¬ 
tion against an excessive price being charged. There 
are some purchasing offices who from the very nature 


CONTRACTS 


135 


of the business must issue a great many such orders 
daily, and in those cases dependence must be placed 
on the records of prices kept in the offices to secure 
fair and just treatment. This emphasizes the im¬ 
portance of keeping all information and data in good 
shape and up to date. 

Contracts 

As already stated in previous chapters any agree¬ 
ment made between buyer and seller is a contract. 
This is true even of a verbal offer to buy and a verbal 
acceptance. It is also true of a written order when 
accepted by the seller. That which is usually desig¬ 
nated a contract however is a document on which 
the signature of both parties appears. 

Contracts to buy and sell are of so many kinds 
that it would be impossible to attempt to fully de¬ 
scribe them. There are certain fundamentals how¬ 
ever in all such contracts which must be strictly ad¬ 
hered to. These will be discussed in a later chapter 
on the legal aspects of purchasing. The object of 
the present chapter is to illustrate some of the forms 
of contracts which the purchasing agent has to 
negotiate most frequently. 

For this purpose we cannot do better than to take 
a series of contract forms used by the Western Elec¬ 
tric Company. These are exceptionally complete 
and cover all that is usually requisite in making 
contracts for supplies over a given period of time. 

Contracts for machinery and apparatus for equip¬ 
ment purposes are usually executed on the forms 
compiled by the manufacturer of the particular 


136 


PURCHASING 


machine which they themselves make and quite 
often descriptions and technical references are in¬ 
serted which would not be applicable in any other 
contract. 


CONTRACTS 


137 







138 


PURCHASING 





CONTRACTS 


139 



Figure No. 53. — Third sheet of contract. 

















140 


PURCHASING 



Western EtecMcCompany “ 


TELEPHONE AND TELEGRAPH BUILDING 
IBS BROADWAY 
NEW YORK 


o 


o 


Sfss sir s as sa^g yrssag srsMwss sr 


Figure No. 54. — This is substituted for figure No. 52 when a definite 
production schedule is specified. 




CONTRACTS 


141 



Figure No. 55.— This sheet is substituted for sheet Fig. No. 52 when 
definite minimum and maximum quantities are specified with a 
production schedule. 













142 


PURCHASING 



Figure No. 56. — This sheet is substituted for Fig. No. 52 when no 
guarantee is given to take any definite quantity. It covers require¬ 
ments only. 






CONTRACTS 


143 


A. L. SALT. 

Vice r«C«IOCNT 
W r. BANCKER. 

UNCAAl PUftCHA»lMO AURf 

NEM YORK 


r 


Western Electric Company, ~ 

TELEPHONE OCFAHTAICWT * 


mcmock invoice* in ov#uc«Tt to aoovc aoooc**. fteno t*iaiicat« 
coot TO ntennone »unouc« venvicc division 
<H ••oaowav, new vonn, n. v* 

H DATE 


PURCHASE ORDER NUMBER 

CUSTOMER • NUMBER! 

• MOW THESE NUMBER! ON ALL PACKAGES 


L 


J 


• HIP 


IMPORTANT 

RENDER ALL INVOICES 
AS SHOWN ABOVE 


QUANTITY 


PLEASE FURNISH THIS COMPANY WITH MATERIAL SPECIFIED 
HEREUNDER IN ACCORDANCE WITH "CONDITIONS OF PUR¬ 
CHASE AND 8PECIAL INSTRUCTIONS" SHOWN BELOW. 


-OIMCCARD CUSTOMCR'9 ClASSIFICATIOn ACCOUNT* IHOWN MCAC E)C 


IMPORTANT 


SHOW PURCHASE OROER ANO 
CUSTOMERS NUMBERS ON 
ALL INVOICES, SILLS OF 
LADING ANO SHIPPING 
PAPERS. 


SPECIAL INSTRUCTIONS 

SHIP ON OR BEFORE-. BHIP ON-NOT BCFOQC 

Enclose our packing slip with each shipment. Render Invoices within 24 hours after shipment, otherwise mail shipping notice to us 
promptly and show thereon, all order numbers, through routing and weight. 

Include prepaid charges on invoice for merchandise when sold f. o. b. point of ongin and shipped prepaid as instructed on our order, 
and attach to the respective invoices receipted freight bill, or copy of bill of lading with amount of prepaid charges shown thereon. 

CONDITIONS OF PURCHASE 

Bills will be paid on the 20th of the second month following date of the invoice, unless otherwise agreed. 

No charges allowed for packing or cartage. 

By accepting this order you hereby warrant that the merchandise to be furnished hereunder witl be in full conformity with the specific** 
tion, drawing or sample and agree that this warranty shall survive acceptance of the merchandise and that you will bear the cost of inspect¬ 
ing merchandise rejected. 

By accepting this order you hereby guarantee and agree that the merchandise to be furnished hereunder will not infringe any valid 
patent or trademark, and that you will, at your own expense defend any and all actions or suits charging such infringement and will save 
us, our customers and those for whom we may act as agent in the purchase of said merchandise, harmless in case of any such infringement. 


T 271 QNA-1 (1-24) BUYER 


Figure No. 


57. — Form of order issued by the Western Electric 
applying on contracts described in this chapter. 


Company 




















144 


PURCHASING 



Figure No. 58. — Contract Record used by the Warner Sugar Corporation. 





















































































































CONTRACTS 


145 



Figure No. 59. — Form used by the Nichols Copper Company for keeping record of deliveries 
made on contracts. This is a loose leaf sheet. Size 8 V 2 x 11 inches. 


























































CHAPTER XI 

Invoices and Methods of Handling 


General Considerations 

HE work in connection with invoices ranks with 



A the most important operations of the depart¬ 
ment. The order may have been placed to the very 
best advantage as regards quality, price, delivery, and 
terms, but all of these benefits may be lost if the 
invoices are not dealt with in such a manner as to 
insure their being permanently secured. This is 
done by careful and prompt checking. Careless check¬ 
ing might mean that prices were approved in excess of 
those stated on the order, and delay in handling the 
invoice might cause the loss of cash discount, and in 
addition the loss of indirect and contingent advantages 
which accrue from the prompt approval and payment 
of invoices. 

It is the custom of some offices to insist on the 
use of uniform invoice forms. These are sent out 
with the purchase order, and the order itself con¬ 
tains a clause to the effect that they must be used 
when invoices are rendered. It is a proceeding which 
has been much criticized, and great difficulty has been 
experienced in getting it adopted. All the advantages 
of such a scheme are on the side of the buyer. To 
the vendor it is a source of trouble and annoyance 
and interferes with his accounting methods. To a 
limited extent all business houses get a certain amount 


INVOICES AND METHODS OF HANDLING 147 


of advertising from their stationery and are recognized 
impersonally from it. There is no individuality for 
the vendor in the uniform invoice, and unless it can 
be brought into universal use it will be very unpopular 
with some houses. 

To any person unaccustomed to the handling and 
paying of invoices it might seem inconceivable that 
any large establishment with an up-to-date account¬ 
ing system could pay an invoice twice. Yet this is 
an occurrence of more or less frequency with both 
large and small businesses, and will probably never 
be entirely overcome while the human element is a 
factor in dealing with the invoices. If the method 
outlined here is followed, it should be impossible for 
duplicate invoices or invoices covering the same ma¬ 
terial to be approved twice. If it was just a ques¬ 
tion of duplicate invoices, that is invoices bearing same 
date, for the same material and the same amount, 
the matter would be simplified because these are more 
easily detected. But there are other complications, 
such as two invoices being rendered for the same 
material but inadvertently bearing different dates; 
also where, say a party has an order for 120 articles 
with instructions to ship twenty by express and bal¬ 
ance by freight. The twenty are supplied and invoice 
mailed, the balance of 100 may be shipped by freight 
the same or next day and another invoice rendered, 
this time for the full quantity of 120. There are several 
other ways in which invoices can be made out im¬ 
properly but inadvertently and containing charges for 
material and supplies, not actually shipped. But these 
illustrations will suffice to show that it is entirely the 
province of the purchasing department to prevent 


148 


PURCHASING 


approval of them, for if they once get through there 
they will probably be paid. An accounting depart¬ 
ment vouching many thousands of invoices each 
month will look to the purchasing department for 
protection against such errors as cited, therefore, the 
safeguards must be foolproof. In small offices where 
proper precautions are not taken invoices frequently 
get through and duplicate payments are made. Han¬ 
dling the smaller quantity makes no difference in this 
respect for the bookkeeper receives the invoices daily 
and probably posts them in his ledger without con¬ 
sidering the order of date. At the end of the month 
he may make out a pay statement of the invoices 
for which check is to be sent and does not perceive 
that he has two similar amounts of the same date. 

Many purchasing offices do not keep a register of 
invoices as it is looked upon as an unnecessary ad¬ 
dition to the work with no compensating advantages. 
In some cases, however, it is indispensable, particu¬ 
larly where invoices have to be sent out of the office 
to some other department for approval. If a record 
is not made and the invoice cannot be traced, it may 
be side-tracked and payment delayed. The seller is 
entitled to his money in accordance with the terms 
of the contract, and the purchasing department must 
do its part in the routine work by passing his invoice 
promptly. Where a cash discount has been arranged, 
it is important to see that the invoice is passed 
through for payment before the expiration of the time 
the discount is available. Where the purchases are 
large and are of a nature in which cash discounts 
are customary or have been agreed upon, it is very 
expedient that the fullest advantage should be taken 


INVOICES AND METHODS OF HANDLING 149 


of the arrangement and the economic benefits secured. 
During the course of a year the amount saved by 
discounting invoices will be considerable, in addition 
to which it adds to the reputation of the concern and 
puts more power into the purchasing agent's hands 
when buying. Any business house will give pref¬ 
erence to and favor relations with buyers from whom 
prompt settlements can be positively relied upon. 

In some cases it is the practice for the accountants 
to receive the invoices and check them against ma¬ 
terial received and in all other respects, with the ex¬ 
ception of price, which is checked in the purchasing 
department. It is a matter of the most suitable ar¬ 
rangement for the smooth and economical operation of 
the whole establishment, but it certainly should be up 
to the man who buys the material to certify that the 
price is correct and the quality right. Whatever course 
the invoices take in passing through the various 
stages of certification, these two things distinctly be¬ 
long to the purchasing department. It is the opinion 
of many that the department should be made entirely 
responsible for the invoice up to the last stage when 
it is vouched for payment. This, however, is not 
feasible in large establishments where the ramifica¬ 
tions of the work of the accounting department cover 
the bookkeeping functions of stores and production 
costs with which invoices are closely allied or inter¬ 
related. 

Recording Invoices 

In every case, irrespective of the nature or magni¬ 
tude of the business, the invoice should go in the 
first place to the purchasing department and a record 


INVOICE RECORD 


150 


PURCHASING 


Date 

Sent 





Received 









Amount 









Date 





Sent to 
Accountant 





Date 

Returned 





Date 

Sent 





Sent to 
Dep’t No. 





Received 





Amount 









Date 






3 


c 

s 

£ 


o 

£ 

H 

W 

W 

R 

02 


o 


o 


o 


Figure No. 60. —Invoice Record. Loose leaf ledger form with margin on left for binding. 









































INVOICES AND METHODS OF HANDLING 151 


be made of it on some method similar to that shown 
in Figure 60. This is a loose leaf ledger arrangement, 
and the pages can be as wide as occasion demands, 
repeating the ruling as necessary. When the in¬ 
voices are listed in this record, a watch should be 
kept to detect duplicates, and if any are discovered 
bearing the same date and for the same amount, an 
investigation should be made, for this is the first 
test the invoice passes through and improper or irregu¬ 
lar ones should be immediately suppressed. 

Preliminary 7 Work 

After recording the invoice the first thing neces¬ 
sary is to scrutinize the date when payment will be 
due to secure the cash discount and an effective 
method adopted of keeping this date prominently before 
all persons with whom the invoice comes in contact. 
It is customary in some offices to paste a small sticker, 
similar to Figure 61, on the invoice, calling attention 
to the date the invoice must be paid to make the dis- 

DISCOUNT EXPIRES 


DATE 


Figure No. 61. —Attachment for invoices to indicate date on which 
discount expires. Size about 2x2 inches. 



152 


PURCHASING 


to 

8 

£ 


INVOICED 

PASSED 

















>- 

















X 

u. 

















H 

to 

















in 

2 

a. 

z 

0 

u 

















LU 

h 

hi 

2 

< 

Z 


WORKS 

































STORE 

































DATE 

































MATERIAL 


















ORDERED 

P. O. B. 

















6 

lu 

tr 

















ORDER 

















DATE 


















Figure No. 62. — This is a card 5x8 inches used by the Nichols Copper Company and serves as a permanent 
record of orders placed with any one concern and also as an invoice record. 










































INVOICES AND METHOD OF HANDLING 153 

count available. This should be preferably a striking 
color which can be readily seen, and serves to call the 
attention of everybody who handles the invoice to 
the fact that it must be through by the specified 
date. 

It is also necessary to adopt some uniform method 
of providing space for certifying the invoice. If there 
was room on the face of every invoice a rubber stamp 
would answer the purpose, but this can be done only 
with a limited number. In small offices the practice 


Date 


From 


Purchase 
Order No. 

Quantity 

Description of Material 
















Qtj a.NTTT v 

F.YTTT'.AJ'STnNq 

Quality 

F.O.B. 

Prtce 

FTni’.Trjprr 



Classification 

Amount 











Approved-- 

Figure No. 63.—A form similar to this can be attached to each invoice 
to insure proper certification. No invoice should be vouched for 
payment until this form has been properly initialed in each space by 
the persons checking invoice. Size about 5x5 inches. 
































154 


PURCHASING 


of rubber stamping the invoices on the back is re¬ 
sorted to and answers admirably, but in large estab¬ 
lishments this is not feasible. It is impracticable 
to turn every invoice over to examine its many certi¬ 
fications, and when they are in voucher form the audi¬ 
tors must be able to get at these features clearly and 
quickly. 

A form is shown, Figure 63, which can be pasted 
along one edge and affixed to the invoice without 
obliterating any part of it. Sufficient information 
is written on this to identify it completely with the 
invoice, and spaces can be arranged on it for all the 
signatures required by the auditing system of the 
company. 

A much smaller form can be used, similar to Figure 
64, and this may answer the purpose of some small 
accounting systems. It has one great objection in 
that it is not positively identified with the invoice. 
One of these forms could be detached from an invoice 


INVOICE CHECKED 


For 

By 

Goods Rec’d 

Quality 

Price 

Extensions 

Charge to 

Approved 




. 




Figure No. 64. — An alternate to Figure No. 63 to be used in checking 
and approving invoices. Size about 2x3 inches. 














INVOICES AND METHOD OF HANDLING 155 


for 50 cents and attached to one for $1000 without 
detection. As a measure of protection, where in¬ 
voices are handled by several people, no claims can 
be made for it and it should only be used where the 
clerical work on it is done by one man. 

Checking Invoices With Order 

In all properly organized systems the checking of 
invoices follows a well-defined and consistent course, 
which should be well planned, avoiding laboriousness 
and undue delays. The invoice should be checked 
against the order to see whether it corresponds with 
the price and terms stated, and should be recorded 
on the order itself. This procedure should entirely 
eliminate any possibility of the material or any part 
of it being paid for twice. If the instance already 
quoted is taken, of an order which was placed for 120 
articles, twenty to be shipped by express and 100 by 
freight, it will readily be seen that when the invoice 
for 120 articles came in and the clerk went to record 
it on the copy of the order he would find that an in¬ 
voice for twenty had already been passed and imme¬ 
diately detect the error. 

This method of entering invoices on the copy of the 
order itself is a check against overshipments. An 
order may be placed for 5000 pieces of goods or ar¬ 
ticles which are to be shipped in comparatively small 
lots, and unless a record is kept the supplier might 
continue shipping indefinitely if it suited his purpose 
long after the 5000 were actually delivered. 

Figure 65 shows a scheme for ruling the reverse 
side of the copy of order kept in the office and an 
entry of all shipments and all invoices should be 


156 


PURCHASING 


made here, or if the order is one which involves only 
one shipment and one invoice it can be recorded on 
the face of the order. The majority of orders sent out 
by many purchasing offices are probably filled in one 
shipment, and the ruling on back of the order, would be 
used at rare intervals. In a case where a very large 
number of shipments are made on an order, additional 
sheets printed similar to Figure 65 can be inserted 
in the binder with the copy of order, and should be 
given the same number for purposes of identification. 

In checking and comparing the invoice with order 
not only the price and terms are checked, but it 


SHIPMENTS 

INVOICES 

REMARKS 

Date 

Quantity 

Via 

Date 

Quantity 

Amount 









O 








O 








O 


Figure No. 65.— Reverse side of copy of order which is kept in pur¬ 
chasing agent’s office. This is used for recording shipments and 
invoices made against the order. 


















INVOICES AND METHOD OF HANDLING 157 


should be seen that the description corresponds, that 
the size and weight are correct, also the quality 
specified. In cases where the material is subject to 
inspection before delivery the inspection reports must 
be referred to, to see if it complies with the speci¬ 
fication and has passed a satisfactory test. There 
are various forms of inspection reports and some of 
them may come from one of the firms of inspecting 
engineers engaged for the work. If the reports are 
made by men in the employ of the establishment a 
form similar to Figure 66 can be used. When com¬ 
pletely checked with the order a distinctive check 

Copies to 

JOHN DOE & COMPANY 
360 Cannon St. 

New York City 


Inspection 

Report 


M aterial—- 

Purchased from- 

Inspected by-at- 

Date inspected _Date report sent in— 

Report approved by-Date of approval 

Nature of Inspection and Tests 


Figure No. 66. — Inspection report. If the original does not go to 
the purchasing department a copy should always be sent there. 























158 PURCHASING 

mark should be made on the invoice to show it has 
been done. 

Checking Invoices With Material Received 

The checking of invoice with material received is 
the third preventive against approving invoices twice 
for the same material, and should be just as sure in 
its operation as the check against the order. There is 
always some method of recording the receipt of ma¬ 
terial and Figure 67 shows a sheet which can be used 
by the receiving clerk, storekeeper, or whoever re¬ 
ceives the material and makes the record. It can be 
seen that when an invoice is checked with the material 
received and initialed by the person doing so, it 
should be impossible for this operation to be repeated 
for the same material. This form, Figure 67, is a 
duplicate of the one kept by the storekeeper with the 
exception of the last column. The copy going to 
purchasing or accounting department is arranged for 
checking invoices, and the storekeeper’s copy for his 
perpetual inventory record. In some establishments 
the receiving clerk or storekeeper has to sign the in¬ 
voice, but it involves additional traveling around for 
the invoice and loss of time. Invoices seem peculiarly 
liable to get lost and mislaid, and the elimination of 
any possibilities in this direction is desirable. 

In some establishments the purchasing department 
has nothing to do with checking the invoice with ma¬ 
terial received, this work being done in the account¬ 
ant’s office. The organization of the work of the 
various departments should govern this. If the stores 
are entirely separate from the purchasing, it would 
probably be done in this way. 


INVOICES AND METHOD OF HANDLING 159 


w M o 
a W S 
5 £ o 
a > > 
« ** 
O M 


a o 

H g 
6 £ 
PMO 


o o 


o o 


Figure No. 67.—Loose leaf sheet for listing receipt of material. This is arranged for use in purchasing office. The 
last column should contain the initials of the person checking the invoice with material received Size 11 inches 
wide, depth to suit. 




















160 


PURCHASING 


Compare with Purchase Order No.- 

Prices, Terms & Details Checked & Approved. 

Date- 

PURCHASING AGENT 

Extensions and Totals checked for accuracy 
and discount. 

Date---- 

VOUCHER CEERK 

Approved for discounting before arrival of 
goods. 

Date.. .. . 

AUDITOR 

Receipt of goods against invoice checked and 
approved. 

Date — ■, — - . .. 

AUDITOR 


Figure No. 68. — Form used by the Richmond Radiator Com¬ 
pany for attaching to invoices for the purpose of certification. 


Form A-l* 

RECEIVE 

PURCHA 

VIA 

RECEIVING MEMORANDUM n.m.co 

;d from n atf 

SE ORDER No. PURCR REO. No. INVOICE No INVOICE DATE 

CAR No. PRO No TRAKIdP, OM<?S, 

DELIVER 

ED RY PKQ.S1 IP-YFfi-NO F*TBi CHfiS, 


OUAI 

*TITY 

WII4HT 

DESCRIPTION OF MATERIAL 

REMARKS 









































CHECKED BY SIGNED 



Figure No. 69. — Form of receiving memorandum used by the Neptune Meter 

Company. 














































INVOICES AND METHODS OF HANDLING 161 

A scheme adopted with success in some plants is 
for the receiving clerk to list the articles or material 
received on the reverse side of his copy of the order 
which is ruled specially for that purpose. This is then 
attached to the invoice and serves the same purpose 
as the form shown in Figure 63. This method has 
one great drawback which is that orders having many 
shipments and invoices rendered against them must 
have supplementary forms for approval of all in¬ 
voices before the final one to which copy of order is 
attached. 

Checking Prices 

There are always some orders sent out on which 
the price is not quoted, and the invoices received 
against these must be carefully checked to see that 
price charged is correct. The order may have been 
a confirming one to cover an emergency purchase and 
no price arranged. It must be examined therefore and 
if the price charged is not a fair one it should be taken 
up with the suppliers. In doing this and in going 
through the invoices for errors in prices, changes in 
fist or net prices, also in discounts, must be noted and 
recorded on the price cards. 

Emergency orders are probably issued by every 
purchasing department. This is done by telephone or 
letter and sometimes the official order is not mailed 
until a price has been fixed. This is to enable the 
price to appear on every order, but it is doubtful 
whether any better prices are obtained than those se¬ 
cured by a good man checking the prices on invoices 
rendered against such emergency orders. There are 
some establishments where the character of the business 


162 


PURCHASING 


necessitates the issuance of a large number of these 
orders daily, and the holding back of the regular 
official order until a price were arranged would lead 
to endless confusion. 

Checking Freight Charges 

If there are any freight charges or freight allow¬ 
ances in connection with the invoice, the traffic man 
must check and approve these. It is quite customary 
for the shipper to sell his product f.o.b. the shipping 
point, but with freight allowed to a competitive point 
or to destination. These charges are sometimes paid 

NOTICE OF FREIGHT CHARGES PAID 

There has been paid by- 

$-For freight charges on-. 

Shipped by-. 

From-Car Nos___ 

Purchase Order No.-Reads F. O. B.-_ 

This freight should be charged back to shippers. 

Date- 


Figure No. 70.—Notice regarding freight charges. Size 5x8 inches. 


by consignee, and in other cases an allowance is made 
on the invoice. If the consignee’s factory is located, 
or material received, at some distance from head office, 
an advice should be sent to the purchasing office of any 
freight paid to enable the traffic man to check it 
and see that the proper credit is obtained. Figure 70 
indicates a form of advice to accountant regarding 












INVOICES AND METHODS OF HANDLING 163 


Order no... 

Charge, to 

DEBIT MEMORANDUM 

DATE, .. .. 


192 







PARTICULARS OP CHARGE 

AMOUNT 



APPLIES ON THEIR INVOICE 

_DATED ... — 



Purchasing Deft. 


Figure No. 71. — Form used by Nichols Copper Company for 
attaching to invoices when passing them to Accounting 
Department, if there is a freight charge or other debit 
applying on the invoice. 



Figure No. 72. — Register of invoices sent daily to 
Accounting Department. 





































164 


PURCHASING 


this. If the invoice has already gone through there 
should have been a notation on it about the freight 
allowance, and this advice will be a confirmation of 
it. Express charges are another thing which should 
be closely watched. When delay has occurred in mak¬ 
ing shipment and urgent calls are sent for the material, 
a shipper will frequently send it by express, but omit 
to pay charges. If the delay is the fault of the con¬ 
signor he should be debited with the charges, or the 
difference between freight and express charges. 

Checking Extensions 

The checking of extensions is done more often by 
the accounting office than by the purchasing depart¬ 
ment, and when it falls to the latter to take care of it 
the work must be designated to some person who 
is familiar with trade discounts as these appear very 
frequently. 

Classification 

The classification of an invoice or the allocating of 
the amount among several accounts will also probably 
be done by accountants, but if done in the purchasing 
office it must be seen that it appears on the slip in 
the space shown in Figure 63 or. Figure 64, whichever 
is used. 

Approval 

The approval of the invoice as far as it concerns the 
purchasing department may be covered by the various 
checks it has already had, each of which will have 
been initialed by the clerk who handled it at the time. 
The final approval required by the auditor will prob- 


INVOICES AND METHOD OF HANDLING 165 


ably be the accountant’s to certify that the proper 
charges or credits have been made to the factory 
accounts. Its final exit from the purchasing depart¬ 
ment should be recorded on the form on which it 
was first entered (see Figure 60). 


CHAPTER XII 
Operation of Stores 


General Remarks 

T HE operation of the storeroom may or may not 
come under the jurisdiction of the purchasing 
agent, but whether it does or not, the receipt and con¬ 
trol of raw material and supplies are so closely allied 
to the purchasing department, that some description 
of the duties pertaining to the work and the course 
taken by the material until its final consumption or 
disposition is necessary to complete the object of 
this book. 

If the purchasing agent is held responsible for pur¬ 
chases to keep a manufacturing plant running, it 
does not seem right that he should have no voice in 
the maintenance of stock, and, in conjunction with 
the heads of departments interested, a voice in deter¬ 
mining the maximum and minimum quantities kept 
on hand. For on the latter depends quite often the 
price to be paid. 

There are always losses in producing anything in 
each stage of its development. There is a loss in the 
labor item from “soldiering” or some other cause, 
and there is a loss in material from waste, pilfering, 
etc. It is the mission of the stores department to pre¬ 
vent this. A loosely kept storeroom without a proper 
system, is one of the most fruitful causes of losses, 
but it can be eradicated altogether, or reduced to an 


OPERATION OF STORES 


167 


imperceptible minimum by the receipt, control, and 
delivery of all material used through a well organized 
and systematized stores system. There are four points 
to consider: 

1. The receipt of materials and supplies into stores 
and their accurate recording. 

2. The storing in convenient and safe places and 
receptacles. 

3. The delivering of the right materials to the right 
persons. 

4. The keeping of an account of the stores in an 
accurate and efficient manner. 

Receiving Materials and Supplies 

In some establishments the storekeeper receives all 
materials, but in the larger ones there will be a re¬ 
ceiving clerk, whose duties will be to receive and 
receipt for all articles coming into the establishment 
and deliver them to the stores and sometimes directly 
to the department. 

He should not receive anything unless he has a copy 
of the purchasing agent’s order, which he should refer 
to and compare with the arriving material. If this is 
not done he is liable to receive goods not ordered, or 
which have been canceled, thereby getting the pur¬ 
chasing department in trouble and probably causing 
loss to the establishment. Quantities in excess of 
those ordered should never be received without con¬ 
sulting with the purchasing agent. 

The receiving clerk will probably report directly 
to the accounting department, sending copies of his 
lists of materials and supplies received to the pur¬ 
chasing agent and storekeeper. Whether the store- 


168 


PURCHASING 


o 

E-* 

m 


5 
O 
H 

m 

o 

H 

6 

HH 

P 

W 

> 

>-* 

w 

o 

w 

P$ 

S 

W 

E- 

«< 


Q J- 

■S 0. » 
5 « w 

a <• 


W 

H 

◄ 

Q 


S3 

o 

I 

£ 

o 

» 

M 

0 


a 

<y 


■< 


o 

K 

&< 

a 

w 

> 

b-t 

» 

5 

w 

« 


w 6 
a « 

o w 
« Q 
P K 
WO 


O 


O 


O O 


Figure No. 73.—Material received sheet. The last column on this sheet is used for initialing the item when entry 
is made on perpetual inventory. In other respects it is similar to form shown in Figure No. 67 with which it 
should register. 








































OPERATION OF STORES 


169 


keeper received the material or not when it first arrived 
into the establishment, he has to receive it into the 
storeroom with proper checks and records. 

If reference is made to the forms shown in Figures 
67, 73, and 74 a clear understanding can be had of the 
method outlined for recording receipt of material. 
All three of these forms are not always necessary, but 
two of them must be used whether there is a re¬ 
ceiving clerk in the establishment or not. The store¬ 
keeper must have one list to enable him to enter the 
material on his perpetual inventory and another list 
must go to the purchasing or accountant’s office for 
the purpose of checking invoice. 

Figure 73 illustrates a method of listing the ma¬ 
terial. This is arranged in a similar manner to the 
copy sent to the purchasing agent, Figure 67, the only 
difference being in the last column. This is used 
by the storekeeper when making his entry on the per¬ 
petual inventory, whereas in the purchasing department 
the duplicate form, Figure 67, is used when checking 
invoice with material received. This sheet represents 
to the storekeeper what the journal does to the book¬ 
keeper, and he debits each account on his perpetual 
inventory, which is his ledger, with each item on the 
receiving sheet. 

The copy of the report of materials received into 
stores which goes to accountant’s office will probably 
need a column for inserting the value of the goods, as 
shown in Figure 74. If three copies are made, they 
should register with each other, the only difference 
being in the last column. This difference is caused by 
the fact that the storekeeper is mainly interested in 
quantities, whereas the accountant’s interest is prin- 


170 


PURCHASING 


O 

£ 

Eh 

W 

W 

w 

U1 


w 

tH 

< 

Q 


a 

0 

a 

< 

> 


o 

a 

P$ 




55 

o 

H 

a 

w 

a 

o 

CO 

a 

Q 


0 


h! 

> 


a 

o 

a 

a 

a 

a 

> 

M 

a 

o 

a 

P5 


a 6 

w a 
« o 

P K 

C0O 


o 


o 


o 


o 


Figure No. 74.— Copy of material received sheet arranged to go to accounting department. The last column on 
this sheet is arranged for the value of goods to be inserted which enables the accounting department to condense 
its work of keeping the stores account. This form should register with those shown in Figures No. 67 and No. 73. 



























OPERATION OF STORES 171 

cipally in values. This is the chief distinction in the 
results accomplished by their bookkeeping. 

Having checked the material with copy of purchase 
ing agent's order, any mistakes on the part of the 
shipper as to quantity and size can be detected. 
Should the shipper have exceeded the number of ar¬ 
ticles or weight ordered, this will also be discovered. 
If it is decided to return the excess quantity or 
wrong sizes, this can be done much more conveniently 
before the material is placed in storage bins than after¬ 
ward. In large plants there will probably be an in¬ 
spector to examine materials, but in many cases the 
storekeeper himself will examine material on arrival 
and determine, as far as such an examination can do 
so, whether or not it conforms to the description and 
specification on order. 

If the material is to be subjected to tests, samples 
must be sent to the laboratory which is maintained 
in the plant, or to one outside. These samples must 
be so marked or separated that identification is posi¬ 
tive with the shipment they were taken from. 

Any questions which arise regarding freight on goods 
in or out of the establishment must be taken up with 
the man in charge of traffic, or reported to him. 

It will be appreciated from this brief description 
that the man in charge of receiving goods fills a 
responsible position in connection with the orders 
placed by the purchasing department. Among his 
duties will be the receipt of goods returned from 
customers, and he should have specific instructions 
whether to accept or refuse these. 

After the material has been received and properly 
counted, weighed, and measured, there may be some 


172 


PURCHASING 


articles which are sent directly to the departments in¬ 
stead of to the stores with copy of receiving slip, which 
should be signed and returned to the stores. The entry 
is made on the stores record exactly as if the material 
went into and was delivered out of the stores. This 
keeps the cost accounting department straight. 

Another method of reporting receipt of goods, al¬ 
though not generally considered as good as that out¬ 
lined, is to report each arrival separately and, instead of 
making a daily list of materials as already indicated 
by Figure 73, to make out a slip for each shipment 
as it comes in, somewhat on the lines shown in Figure 
75. A copy of this should go to the storekeeper, a 
copy to purchasing agent, and another to cost depart¬ 
ment. The last named will require to know des¬ 
tination of material, in order to charge it to proper 
account. 

Another scheme adopted by some is for the copy of 
the purchasing agent’s order to be signed by the re¬ 
ceiving clerk as a notification of receipt of material, 
making out no receiving slip. This has many objec¬ 
tionable features, however, and it w^ould be only in 
most exceptional circumstances where it would answer 
satisfactorily. A method in which the copy of pur¬ 
chasing agent’s order is used to report receipt of ma¬ 
terial is shown in Chapter XIV. Wide experience led 
to its adoption in this case. 

It is important that the material-received sheets, 
or receiving slips should be numbered, as they are 
liable to get lost or mislaid, and any break in the 
sequence would at once call the attention of the pur¬ 
chasing or cost department to the fact. 


OPERATION OF STORES 



173 


Figure No. 75.—A form for reporting the receipt of each arrival of goods. Size about 6x7 inches. 





















174 


PURCHASING 



Figure No. 76. — Report of “material received” form used by the Rich¬ 
mond Radiator Company. This is written up at the same time as the 
order and bears Order No. 

















OPERATION OF STORES 


175 



Figure No. 77. — This copy of the order of Consolidated Gas Company is sent to Receiving 

Department to check receipt of material. 



























176 


PURCHASING 



Figure No. 78. —Report made by the Receiving Department of Western 
Electric Company. This is also a copy of the order and bears same 
number. 



























OPERATION OF STORES 


177 



Figure No. 79. — This is the form used by the Western Electric Company 
for reporting inspection. It is written up at same time as order 
and bears same number. 




178 


PURCHASING 



CO 

X 


Figure No. 80 . — Form used by Nichols Copper Company for reporting receipt of material. Size 
inches. One copy of this goes to the Purchasing Department for checking with invoice. 














OPERATION OF STORES 


179 


The Proper Storage of Materials and Supplies 

The proper storage of materials and supplies is of 
equal importance to receiving and delivering them. 
When adequate provision has been made for receiv¬ 
ing goods, examining them, reporting poor quality 
or deficiencies, there is the problem of storing them for 
varying periods. There are several things to be con¬ 
sidered. One hundred dollars in the cash drawer 
would be locked up; there may be one hundred dollars’ 
worth of copper bars in the stores which should be 
just as secure from theft, or one hundred dollars’ 
worth of rubber which must not be allowed to de¬ 
teriorate. 

The stores, therefore, should not be entered by any 
unauthorized person and proper receptacles should 
be provided for all material. It is not possible to 
give a description that would fit the needs of every 
business, but generally the stores must be equipped 
with racks, shelves, bins, drawers, and boxes to suit 
the nature of the materials. 

Some considerations are common to any stores; 
for instance, material which is constantly called for 
should be within easy reach, and heavy material 
should be at a convenient height for loading onto a 
truck. The alleyways should not be too narrow, as 
the racks darken them, and insufficient space makes 
it awkward to get material out promptly. Some 
shelves and racks are built narrower at top than at 
bottom which is an excellent scheme for some stores, 
giving more light and elbow room with no loss in 
storage capacity. 

A scheme which has been adopted by some and may 


180 


PURCHASING 


commend itself to others, is to have duplicate bins or 
bins extending through from one aisle to the next, the 
object being to place new material in one side and 
take the old out from the other side. This is to pre¬ 
vent an accumulation of old stock. Not all estab¬ 
lishments can afford the room for this, but it has its 
advantages, particularly with .stores which are liable 
to deteriorate with age. 

In large plants it will probably be necessary to have 
several storerooms located near departments where 
material will be used. This may entail some dupli¬ 
cation of stores, but will be fully compensated for by 
the saving in men’s time in obtaining stores. Some 
material can be stored outside, including such things 
as heavy castings, lumber, fuel, etc., but all should 
go on store records. 

REQUISITION ON STOREKEEPER 


This Requisition will not be accepted if order No. is not given, if it is 
not signed by foreman, or if material is to be charged to more than one 
order. 


Order No. 

Quantity 

Description 

Size or 
Pattern No. 






Date_ Signed___ 

Foreman 

Figure No. 81.— Requisition on storekeeper. Size about 4x6 inches in 
duplicate. 











OPERATION OF STORES 


181 


Deliveries from Stores 

Not less important than the receiving and storing 
is the delivering of stores. There must be a properly 
authorized list of foremen or others who are em¬ 
powered to sign requisitions for withdrawing material 
or supplies from storeroom. Irresponsible persons 
should never be given the power, and if the material 
is small in bulk and high in intrinsic value the fore¬ 
man’s honesty should be dependable. Even then, and 
with precautionary measures instituted in the shop, 
some losses will occur from pilfering. There will 
also always be some losses through waste, but with 
close watching and safeguarding it can be reduced to 
the smallest dimensions. 

There are two methods of obtaining goods from 


Date 

REQUISITION 

For Material or Supplies 

Order No. 

Quantity 

Description 

Size or Symbol No. 




Dep’t No 

Foreman 



Delivered Delivered 

To ... By 


Figure No. 82. — Requisition on storekeeper. An alternate to figure 
No. 81. 



















182 


PURCHASING 


stores, the one principally in vogue being carried 
through by the foreman making out and signing a 
requisition for what he needs for the product his men 
are engaged on. Several illustrations of these are 
given (see Figures 81, 82, and 83). They should 
state clearly the exact quantity required, with size or 
other necessary particulars to enable the stock man to 
deliver material promptly. They should give order 
number and any details which are essential to the 
work of the cost department where they will eventu¬ 
ally go. They should be in duplicate of contrasting 
colors, the object of this being that when they arrive 
in the cost department the originals are easily dis¬ 
tinguished from the duplicates. Some cost depart¬ 
ments require the requisitions to be ruled with a 
column for pricing the articles, others do not; this 


Date 

REQUISITION 

For Material or Supplies 

Order No. 

Quantity 

Description 

Size or Symbol 

Price 

Value 







Dept No. Foreman 

Delivered Delivered 

To By 


Figure No. 83 — Requisition on storekeeper with column for inserting 
value by the cost accounting department. Same size as Figures No. 
81 and No. 82. 





















OPERATION OF STORES 


183 


column is for use only in that department (see Figure 
83). In some plants it might be advisable to give 
each department requisitions of contrasting colors, 
and in large plants the numbers of the requisitions 
should be prefixed by a distinguishing letter for each 
department. 

The original only is sent to the storeroom, the copy 
being sent by the foreman, after he has received the 
material, to the cost department. When the original 
finally reaches there, they can be checked against each 
other, preventing falsification on the part of either 
foreman or storekeeper. The original having been 
presented at the storeroom, material received and 
receipted for, it is also sent to the cost department after 
the necessary clerical work is done in stores. Al¬ 
though not essential, it is advisable to have the 


MATERIAL RETURNED TO STORES 

CREDIT 0 „„ No _ D „ 


Quantity 

Description 

Size or Pattern No. 




Dep’t No. 

P'nrpmnii 



Delivered Received 

By By 


Figure No. 84. —Credit requisition for material returned to stores. Same 
size as Figure No. 81, but a contrasting color. 

















184 


PURCHASING 


requisitions numbered, as it facilitates the work of 
sorting and comparing them on their arrival in the 
accounting department. 

There will be from time to time an excess amount 
of material withdrawn by foremen, or shop orders 
may be canceled or curtailed, necessitating the return 
of some material to the stores. This is effected by 
the foreman making out a credit requisition, as 
shown in Figures 84 and 85, the original and dupli¬ 
cate of which he sends with the material, and proper 
credit is given. The duplicate is signed by the 
stock man and returned to the foreman, who sends it 
to the cost department. 

Another method of obtaining material from the 
stores is by means of the material budget. This 
is used in some factories very satisfactorily, and for 
certain kinds of production work it answers splendidly. 


Date 


CREDIT 

Material Returned to Stores 


Order No. 


Description 


Size or 
Symbol No. 


Dep’t No.- 


Foreman 


Delivered 

By- 


Delivered 

To 


Figure No. 85. — Credit requisition for material returned to stores with 
column for accountant to insert value. 























LIST OF MATERIAL REQUIRED FOR 


OPERATION OF STORES 


185 


P 

Eh 

<5 

Q 


Eh 

P 

O 


p 

o 

HH 

P 

Ah 


P 

Eh 

A 


Q 

P 

P 

CO 

03 


o 

£ 

P 

P 

a 

o 


>H 

ffl 

Q 

P 

P 

co 

03 


m 

Q 
P 
> 
i—i 

m 

o 

P 

Ph 


P 

S3 

►H 

02 


P 

P 

P 

w 

Eh 

P 

< 


!>h 

Eh 

HH 

Eh 

a 

-*H 

P 

O’ 


p 

HH 

P 

P 

Eh 

< 


£ oq 
o H 

p 

d w 

£ Ph 


O 


Figure No. 86.—Material budget or list of material. A copy of this is placed in the storekeeper’s hands and is used 
for obtaining material from stores. Size 7x7 inches, copies as required. 































186 


PURCHASING 



to pit 

fl s 
.2 a 

■ ♦ * * I i 

O o 

■8 1 
u> fl 
ft O 

a 

s * 

fl fl 

-fl -fl 


TO 

a 

3 

to 

.2 a 


t-p 

A O 


A 


° X 
A P 
fl 

_ 5- 1 

O -3 

A 


.2 a 
^ .2 
H -g 

a 

„ '■fl 
-. o 

T3 £ 

Q ” 
S-. 

'V 2 

6* 

- fl 

• 

J?£ 

T3 fl 

<S « 

V .fl 

-fl T3 

2 T3 

-fl aj 

+-> ^ 


o 

b s fc 

O' 

O 

c3 TO A3 

Eg a c 

QJ O fl 

fl 

a 

, 

> 

fl +3 

cJ 

-u 

2 "to TS 
c *fl fl 

• H 
J-l 

fl 

<D 

fl 



fl 

X 

W 

—p CJ 1 fl 

a a "fl 
t: x a 

S g " 

c3 

a 

<p-i 

t4 

A 

§ J= -g 

o 

o 

S H § 

fl 

bD 

fl 

• *—4 


-fl 

" TO 

S fl 

> ft o 

^ fl ^ 

•75 fl 

° g 5g 

to fl 3 

oj bC O 

<fl ft 
0) CG 

§ O . 
fl -u - 


to bD 
^ fl fl 
'■< a .fl 

» e 1 

a o ® 

c3 -fl 

ft b a 

X O -fl 

A -M 

a 

. - fl fl 
>> ^ -2 
fl 

fl (1) fl 
ft-fl fl 

S 

o 2 

-fl a 

-t-3 

o a 

be a 


— 1-4 

a fl 

O T3 

•“fl J-H 

3 ° 

a 

fl 2 
fl fl? 


& .a 

A flp 

to O 

A O 

*5 '£• 

^ a 

K* 

0 ) o 

CD 

P-Z « 4 -h 

cu o 

a lx 

° b 

o .t^ 


o 

U 


TO 


fl 
fl 

2 

U g ^ 

o .12 

»-C r^H 

S H H 



































OPERATION OF STORES 


187 


But for others it has many disadvantages and is not 
practicable. Where it can be used effectively, it is 
a better check on material used than the requisition 
system; it lessens the accounting work, is a better 
check on loss and waste in the .shop, and brings 
investigation when more material is required than 
actually specified. 

If the factory is engaged in manufacturing some 
article of which the designer or drafting room can 
specify, before work on it is started, all the material 
needed to the minutest detail and make a complete fist 
of it the budget system can be made to work well. 
Figures 86 and 88 show forms used for making the 
budget, or list of materials in a number of machines 
or articles to be manufactured. A copy of this is 
sent to the storekeeper, and as the material is taken 
out it is signed for in the space indicated. When 
all the material is delivered, the bill of material is 
sent to the cost department. This method simplifies 
the work of the cost department because the value 
of the material can be figured out on the material 
sheet itself in one lump sum and there will not be a 
lot of small requisitions to deal with. It is a better 
check on the shop, because if more material is called 
for there must have been loss or waste, which can 
then be investigated. 

The advantages of this method will be lost if the 
scheme is not rigidly adhered to, and if it is rigidly 
followed it will be found arbitrary, inelastic, and slow 
in any emergency. The material also should be all 
drawn from stores within a reasonable time; if not, the 
sheet will be in use in the storekeeper's hands for such 
a long time as to become illegible or probably lost. 


BILL OF MATERIAL 


188 


PURCHASING 




< 

Q 


P? 

O 



Figure No. 88. —Material budget alternate form to Figure No. 86. Size 8x8 inches. 

































OPERATION OF STORES 


189 


Stores Accounts 

It has been explained in what manner the material 
goes into and out of the stores, and it is absolutely es¬ 
sential that an exact record should be kept of these 
incomings and outgoings. Theoretically a storekeep¬ 
er’s account should balance as accurately as a 
cashbook does with the cash on hand, but this is 
never the case. It is remarkable, however, how 
closely the records tally with physical counts in well- 
kept stores. Well arranged and lighted buildings 
with honest and intelligent help are all conducive 
towards this end. There is nothing complicated or 
intricate in stores accounting, but care and accuracy 
are essential as in every other form of bookkeeping. 
With these characteristics the work will be found 
comparatively easy for any man with only a rudi¬ 
mentary knowledge of accounting. 

The whole scheme of stores accounting centers 
around the perpetual inventory (see Figure 89). It 
is the ledger of the system, carrying accounts with 
each description of material or supplies kept in stock, 
with debit and credit columns arranged so that a bal¬ 
ance can be readily calculated. The location of the 
article should be given; this corresponds to the ad¬ 
dress of a customer in the sales ledger, and the amount 
of credit he is entitled to is comparable to the maxi¬ 
mum stock permitted. The illustration of a perpet¬ 
ual inventory shown in Figure 89 is arranged for 
recording quantities only, which is all the majority 
of stores are required to do. Some storekeepers 
have to record values and quantities, but these are 
exceptional cases. The cost accounting department 


190 


PURCHASING 


O 

£ 

H 

a 

a 

M 

CO 


Q 

W 


P? 

H 

> 


■< 


55 

o 

HH 

H 

<3 

O 

o 

P 


o 

55 

a 

a 

a 

a 

co 


o 

55 


PQ 


Q 

H 

P 

co 

CO 


H 

o 

I 


Q 

w 

p 

co 

co 


Q 
W 
> 
H-♦ 

W 

o 

H 

Ph 


Q 

W 

Ph 

H 

Q 

P5 

O 


Figure No. 89.—Perpetual inventory. The Stores Ledger. Loose Leaf Sheets. Size as required. 





























































OPERATION OF STORES 


191 


usually takes care of the values, but there may be 
reasons why they should be kept in both depart¬ 
ments, in which case the perpetual inventory would 
have to be arranged accordingly. See Figure 90 
for this form. 

On receipt of anything into the storeroom, the 
proper entries must be made on the perpetual inven¬ 
tory. This will be done from material-received reports, 
credit requisitions for material returned from shop, or 
any other forms used to indicate receipt of articles. All 
of these documents, before being posted or entered 
on the perpetual inventory, will of course have been 
checked and it must be known that the material is 
actually in the stores. In this respect they are synony¬ 
mous with invoices, which would not be accepted as 
correct and entered in the ledger until checked; sim¬ 
ilarly the material-received sheets, etc., must be ab¬ 
solutely correct before being entered in the perpetual 
inventory. If a copy of the material-received report 
has been sent to the accounting department, the stores 
copy can be filed away for reference. The memo¬ 
randums received from the shop with materials to be 
credited must be sent to the accountants to enable them 
to check with copies received from foremen, and make 
the proper credits to production orders. 

Nothing should be permitted to leave the stores 
without a voucher to show for it. These consist 
of the requisitions, which must be entered on the per¬ 
petual inventory and promptly sent to the accountant’s 
department. It is absolutely essential that these 
entries of articles, both into and out of stores, are 
correctly and accurately recorded, otherwise the whole 
object of the scheme will be defeated. 


192 


PURCHASING 



3 


<5 


o 

M 

H 

O 

o 

1-3 


Eh 

W 

£ 


w 

o 

55 

< 

< 

« 


Q 

H 

t> 

02 

02 


Q 

w 

> 

h-t 

W 

o 

H 

Ph 


Q 

W 

o 

5 

Ph 

02 

P$ 


P5 

O 



Figure No. 90.—Perpetual inventory or stores ledger arranged to show both quantity and value. 
































































OPERATION OF STORES 


193 


~ _ _ Maximum _ 

Stock Room Minimum Description 

Unit Used for 


■ 




































r- 

DEPARTMENTAL DELIVERIES 
















































































































03 





































$ 





































r- 





































25 





































o 

-r 










































































CO 

■*r 





































03 





































r»< 





































O 

V 





































03 

eo 





































8 





































CO 





































CO 





































s 





































*5 





































s? 





































% 





































CO 





































8 





































8 










































































£ 





































8 





































8 





































03 





































CO 

CO 





































a 





































Cl 





































*- 

< 

,.o 





































>- 

K 

K 

z 

3 

O 

IN STOCK 

























































































































































































































RECEIPTS 

► 

K 

t- 

Z 

« 

3 

O’ 

























































































































































































































(M i 
o • 

a ac 

a w 

















































































































































Cl 





































ss 





































•A 

»- 

< 

a 





































ORDERED 






































K 









































































* 





































O' 





































-o 

O-J 

>-o 





































<1 





































* * 






































< 

o 






































Figure No. 91. — Stock room sheet used by Neptune Meter Company showing departmental deliveries. 













































































































































Stock Room_Available_Description 

Unit_Used for_ 


194 


PURCHASING 




ments, Ordered, Receipts and Deliveries. 


































































































































































































































































































































































































































































OPERATION OF STORES 


195 


Periodical verifications should be made by actual 
physical count or weighing. It is not sufficient to do 


O 

BIN TICKET 


Bin No_ 

Location- 

Material- 

Drawing No.. 
Pattern No._ 
Size- 


Send this ticket to storekeeper when only-remain 

in bin, and replace it with temporary ticket. 



Figure No. 93.—Storeroom bin ticket. Size 3x7 inches. 
















196 


PURCHASING 


this only when a general inventory is taken. How 
often it should be done depends on the nature of the 
stock. It is not necessary to verify every item at 
one time; the stores can be divided into sections, 
and the work of checking done when it will not dis¬ 
turb the general routine work going on. When there 
is an opportunity, which comes frequently in almost 
every storeroom, the help should be set to count¬ 
ing or weighing articles or materials and when veri¬ 
fied notification should be made on the perpetual 
inventory. By this means the whole stores should be 
covered every two or three months, which will proba¬ 
bly be found often enough. No disturbance or dislo¬ 
cation of regular work will occur and anything wrong 
will be discovered promptly. The storekeeper will 
have the satisfaction of knowing that his stores 
and accounts are in good and reliable shape. 

Stores Tickler System 

In making entries on the perpetual inventory, close 
watch should be kept of balance to see how near it 
is to minimum. The stock man taking articles from 
bins can also watch this and notify the chief storekeeper 
by means of tickets (see Figures 93 and 94). One 
is the regular ticket, Figure 93, which is detached from 
its hook and sent to the storekeeper when minimum is 
reached. In its place the stock man hangs the tempo¬ 
rary ticket, Figure 94, which should be a different 
color. This remains there until additional articles 
are received to bring quantity above minimum. The 
regular ticket is returned by the storekeeper when an 
order has been placed, and both it and the temporary 
ticket remain together until goods are received. This 


OPERATION OF STORES 197 

indicates to the stock man that both he and the chief 
storekeeper have given the matter attention. 


O 


TEMPORARY TICKET 

When only-is left in bin, send regular ticket to 

storekeeper and put this in its place. When regular ticket is returned, 
hang both of them together until stock is above min., after which 
remove this ticket. 


Bin No_ 

Location- 

Materia]_ 

Drawing No.. 
Pattern No._ 


Size. 


Date 

In 

Received or 
Issued by 

Out 

Balance 







Figure No. 94,—Temporary ticket for storeroom bins. 
Same size as Figure No. 93, but contrasting color. 

















198 


PURCHASING 


In previous chapters special emphasis has been placed 
on the desirability of keeping the amount of stores 
on hand at the minimum. There are important eco¬ 
nomic reasons for this. To maintain the stores at the 
minimum and at the same time maintain an ample 
factor of safety in so far as supplying the require¬ 
ments of the factory are concerned means that the 
stores tickler system should provide proper guaran¬ 
ties and safeguards to protect this factor of safety. 
Therefore it should be rigidly kept up. 

In some stores regular bin tickets are not used and 
a simpler form of tickler ticket can be adopted (see 
Figures 95 and 96). In this case the minimum will 
be marked on bin, and when it is reached the stock 
man sends the first ticket to the chief storekeeper who 
makes requisition on the purchasing agent and returns 


O 


Bin No_ 

Material- 

Min. reached and ticket sent 
to storekeeper. 


Date- 


Stockman 


Requisition sent to purchasing agent. 
Date_ 


Storekeeper 


Figure No. 95.—Tickler ticket for storeroom bins about 2x3 inches. 










OPERATION OF STORES 


199 


ticket to the bin. The second ticket is then sent to 
the chief storekeeper, who retains it until he receives 
copy of purchase order, when it is returned to bin. 
The reason for using the second ticket is that it proves 
a sure check on both storekeeper and purchasing 
agent. The storekeeper on receipt of first ticket 
makes a requisition, but if it is mislaid or not acted 
on by the purchasing agent, the second ticket brings 
it to his attention. The stock man at the bin would 
also have his attention drawn to the failure to order 
a new supply if the second ticket did not come back. 
These tickets should be in contrasting colors. 

Scrap 

All scrap should be sent to the storekeeper, who 
should weigh it and arrange a place in his store¬ 
room for such of it as requires to be kept locked up. 

O 


Bin No_- 

Material- 

Requisition notice received. 

Stockman 

Order placed by purchasing agent. 
Date- 


Storekeeper 

Figure No. 96.—Tickler ticket for stock room bins. Same size as No. 95, 
but different color. 









200 


PURCHASING 


He should advise purchasing agent on a form similar 
to Figure 98. The purchasing agent will make a sale 
when he sees a favorable market, and the scrap will 
then be delivered to the shipping clerk. 

Fixing the Maximum and Minimum 

In some plants the storekeeper does not make requi¬ 
sitions on the purchasing agent to buy material, but 
instead sends him a report that stock has reached 
the minimum (see Figure 97). In this case the pur¬ 
chasing agent would decide from his records what 
quantity to order and the date delivery would be 
required. The whole question of fixing a minimum 
is a matter for careful consideration. To obtain the 
best economic results the stock should be kept at 

REPORT OF LOW STOCK 

To Purchasing Agent : Date_ 


The Stock of the following 1 _ 

have reached the minimum. / Storekeeper. 


MATERIAL 

Minimum 

Allowed 

Now IN 
Stock 

REMARKS 


















Figure No. 97. —Report from storekeeper to purchasing agent that 
stock has reached the minimum. Size 4x6 inches. 














OPERATION OF STORES 


201 


lowest point consistent with safety, and to do this 
a study must be made of the rate of consumption, 
probable future rate, and estimated time required 
for delivery. 

If there is no material budget, the storekeeper will 
probably receive copies of production orders, which 
he can check with stock he has on hand, as he should 
know the quantities of material needed for these 
orders, and will then be able to requisition what is 


Date. 


To the Purchasing Agent, 

There has been received into Storeroom- 

of-Scrap. The total quantity now on hand 

awaiting your instructions for disposal is_ 


Storekeeper. 

Figure No. 98. —Report from storekeeper to purchasing agent that 
scrap has been received. Size 4x6 inches. 


required to execute the orders as they progress through 
the shop. 

Before leaving the stores question another word or 
two about maximum and minimum is not out of 
place. Take the simpler proposition of supplies first. 
The records kept in the purchasing office will determine 
the exact quantities used in a given period and any 
intelligent person can fix the high and low with the 
above mentioned records as a basis and also taking 
into consideration the most economical quantities to 
buy in the matter of price, freight charges, etc. 

The maximum and minimum on materials are more 







202 


PURCHASING 


difficult to determine owing to the fluctuations in 
business and the changes in styles of articles manu¬ 
factured and methods of fabricating. There are no 
insuperable difficulties if the sales manager, produc¬ 
tion manager, and purchasing agent get together. 

The first man can estimate approximate sales, 
the second man can tell what shop changes are likely 
to take place, and the third man knows what quan¬ 
tities he can buy to most economical advantage. 
Time is an important factor to be considered. The 
necessary time to make the sales, to manufacture the 
articles, and to obtain delivery of raw material. Fix 
the maximum of raw material low on articles likely 
to go out of fashion, however attractive a purchase may 
look. On standard manufactured products with a 
steady and regular sale the proposition is simple. On 
other goods sound judgment and common-sense will de¬ 
termine the question. The economic benefits and ad¬ 
vantages have been discussed before. Overbuying 
and underbuying are both very expensive things to 
indulge in. Steering the right course in any business 
operation is a most valuable factor and in the function 
of purchasing it is pre-eminently so. 


CHAPTER XIII 
Legal Aspects of Pukchasing. 

General Remarks 

I P a tabulation were made of the character of the 
civil cases which come before our courts for 
settlement what percentage of them would be 
directly connected with purchasing? Outside of 
those cases which appear on the calendars of such 
courts as the Surrogates, or cases regarding family 
ties, the percentage would probably be nearly one 
hundred. 

These cases are caused by various circumstances. 
Laxity in making a contract. Inability to fulfil a 
contract. Misunderstandings as to the interpreta¬ 
tion of a contract. Refusal to fulfil a contract, etc. 
Therefore the contract is the all important factor 
and as a contract is made every time a purchase is 
made it is necessary to know what a contract is. 

Definition of a Contract 

Webster’s Dictionary defines a contract as fol¬ 
lows “ To covenant, agree, bargain.” It has been 
defined by Blackstone as “ An agreement upon con¬ 
sideration to do or not to do a certain thing,” and 
this definition is generally accepted by the legal 
profession either literally or so paraphrased that the 
meaning is the same. 

In purchasing work the word contract is generally 
used to designate an agreement between the buyer 


PURCHASING 


204 

and seller the terms of which are set forth in a docu¬ 
ment signed by both parties. But a contract may 
be made verbally and is just as binding, if it can 
be proven, as a written contract. The conditions 
governing the operations of industrial and mercantile 
establishments demand that all verbal agreements of 
importance be reduced to writing, hence the gen¬ 
erally used term contract. 

A contract is a “ meeting of minds,” that is, two 
parties have agreed (their minds have met in agree¬ 
ment) to do a certain thing. When a price is named 
for an article and it is accepted by the buyer who 
hands over the consideration and takes delivery, that 
is in purchasing the most elemental form of contract. 
Millions of such transactions happen daily. The 
purchasing agent executes a contract every time he 
signs an order which is strictly in accordance with 
the terms of an offer to sell. 

The making of a contract is not always a simple 
thing. It is sometimes very complicated but for the 
general run of purchasing work it is not difficult to 
determine whether a contract has been made. It is 
only necessary to decide whether there has been 
complete agreement between buyer and seller. So 
many misconceptions exist as to what constitutes a 
contract that a few of them will be discussed. 

Offers to Sell and to Buy 

Quotations received by the purchasing department 
are usually in response to a request from that de¬ 
partment, and the issuing of the order in accordance 
with that quotation is an acceptance of it and the 
two constitute the contract. But there are some- 


LEGAL ASPECTS OF PURCHASING 205 

times quotations received which are not definite 
offers to sell. They are only tentative. If it is the 
desire of the buyer to make the purchase on the 
terms outlined he must get the quotations made in 
the shape of a definite offer to sell and accept it, or 
he can issue an order in accordance with the tenta¬ 
tive offer to sell and obtain an acceptance of his 
order. 

A buyer when negotiating a purchase might so 
frame a letter that it would convey the meaning that 
he is making an offer to buy, whereas he may only 
wish a quotation from the vendor. Communications 
of this nature if the transaction is important should 
be carefully worded because a definite offer to buy 
if accepted by the seller would constitute a contract. 

It is important to remember that if an offer is 
made either by the buyer or seller, it must be ac¬ 
cepted exactly as made to complete the contract. 
Should any modification of any kind be made by 
either party the contract is not complete until the 
modifications have been accepted. The essential ele¬ 
ments of purchasing contracts therefore are a defi¬ 
nite offer to sell or buy and are accepted strictly in 
accordance with such offer. 

Time Limits 

If an offer to sell is made subject to acceptance 
within a specified time such a limitation implies an 
agreement to sell before the date named. In making 
contracts involving large amounts the buyer must 
sometimes ask for such a stipulation to enable him 
to consult with others before finally closing the 
contract. 


206 


PURCHASING 


An offer to buy or sell which contains no time 
limits should be accepted in the same manner in 
which it was made. If made by ordinary mail it 
can be accepted through the same channel, but an 
offer made by wire and neglected for several days 
and then accepted by mail or even by a telegram 
would not constitute a legal contract. The essence 
of this is that, when no time is named within which 
a formal acceptance must be made, then the offer 
must be accepted immediately and the acceptance 
would be considered legal if sent through the same 
channel as the offer. 

Changes in Contract 

When a contract has been completed it is assumed 
that it embodies and conveys the true meaning of the 
offer and acceptance and it follows, that it is irrev¬ 
ocable except by mutual consent. 

It may be found however that certain changes are 
desirable. In such a case it is necessary to proceed 
along the same lines as in negotiating for a new 
contract. That is, there must be an understanding, 
“ a meeting of minds,” and the modifications agreed 
upon can be put into documentary form by drawing 
up an entirely new contract and the cancellation of 
the old one. In many cases it is sufficient to follow 
the procedure by which the contract was orignally 
made. That is, one party can make an offer to modify 
it and can secure an acceptance from the other party. 

Contracts made through Agents 

Agents and salesmen are not always clothed with 
authority to complete a contract and many printed 


LEGAL ASPECTS OF PURCHASING 207 

contract forms have a clause in them to the effect 
that the contract is not binding until executed by 
some official of the company. Quite often an agent 
merely serves to bring the two principals together. 
If a buyer has concluded a contract with the prin¬ 
cipal through an agent then any modification of the 
contract must also be agreed to by the principal. 
However, if an agent or representative of a company 
has authority to conclude a contract, then the same 
agent or representative can also agree to modifica¬ 
tions and changes and these are then binding on 
his principal. 

Specifying Quality or Grade 

It is an implied condition of an order issued in 
the usual course of business that the material must 
be of the kind and description specified. Should they 
not be then they may be rejected by the buyer. But 
he has no remedy against the seller, he can only re¬ 
ject the goods tendered. 

In buying from a middleman no guarantee of 
quality is conveyed by the dealer to the buyer unless 
the middleman gives a distinct understanding to this 
effect. On the other hand when material is purchased 
direct from a manufacturer whether or not a guar¬ 
antee is given there is always an implied warranty 
for such material as the manufacturer himself pro¬ 
duces. 

When the conditions surrounding the buyer make 
it imperative for him to obtain goods of a certain 
quality, size, or weight, then it is essential that the 
contract contains a clause guaranteeing this, and 
provisions for determining the quality, size, or 


208 


PURCHASING 


weight. A definite remedy should also be stipulated 
in the event of the seller failing to deliver the right 
kind of goods. With this undertaking accepted by 
the seller the buyer is entitled to damages. 

Date of Delivery 

Prompt delivery on a certain agreed date may be 
a matter of great moment to the buyer. He may 
suffer serious losses if he does not receive the mate¬ 
rial on time. A clause should be inserted to the 
effect that the time of delivery is the essence of the 
contract. It is sometimes necessary to include a 
provision to the effect that the seller shall be liable 
to pay a certain fixed amount for non-delivery 
usually designated “ liquidated damages.” It must 
be shown however that the purchaser has actually 
sustained a loss. Damages cannot be enforced simply 
as a punishment. 

Place of Delivery 

Ownership in property conveyed under contract 
passes to the buyer at the place of delivery. All 
orders should specify a delivery point. If there is 
no express stipulation to the contrary and if there 
are no circumstances which indicate a different in¬ 
tention, the point of delivery is understood to be the 
place where the goods are located at the time the 
order is sent to the seller. 

If the purchase is made f. o. b. point of shipment, 
and the goods are lost or damaged in transit, the 
buyer must nevertheless pay for them, although he 
has never had physical possession of them. His only 
remedy lies in a claim against the transportation 
company. 


LEGAL ASPECTS OF PURCHASING 


209 


Many purchases are made f. o. b. point of ship¬ 
ment freight allowed, but this does not change the 
delivery point at which possession passes to the 
buyer. 

If no reference is made to the delivery point the 
general assumption is that the seller has executed his 
part of the bargain by delivering the goods to a com¬ 
mon carrier, unless it can be proved that the uni¬ 
versal trade custom is contrary to this practice. 

Delivery is supposed to be taken as and when 
specified. If a buyer instructs the seller to defer 
delivery for an indefinite or even a fixed time, he is 
virtually authorizing the seller to store the goods 
for him. The seller is only required to exercise a 
reasonable amount of care in connection with goods 
so held, and any damage to them during this period 
would be a responsibility of the buyer. 

A buyer may refuse to accept goods delivered 
prior to a specified date and his refusal does not 
release the seller from his obligation to re-deliver the 
goods at the time and place specified. 

It is customary for a seller to insert a clause in 
a contract referring to inability to make delivery on 
a specified date owing to causes beyond his control, 
such as a strike, either in his own factory or on the 
transportation company’s lines. If such an influ¬ 
ence prevents delivery being made for a period of 
say two months, the buyer cannot compel the seller 
to accept delivery at the end of that period, neither 
can the seller force the buyer to deliver. The con¬ 
tract, or such portion of it as specified delivery 
within the strike period, is at an end. 


210 


PURCHASING 


Orders and Acceptances, and Contracts. 

Throughout this discussion an accepted order and 
a contract have been treated as synonymous, which is 
true in so far as they represent an agreement between 
buyer and seller, the difference lies in the written 
form. Irrespective of this form an agreement 
reached in accordance with this discussion is a con¬ 
tract. The order is really a “ command ” from the 
buyer to the seller to make, ship and deliver certain 
goods, for which the buyer has received a quotation. 
It is in fact an acceptance of the quotation. The 
ease and simplicity of this method makes it uni¬ 
versally popular for the majority of transactions. 
The lengthy written contract is adopted in those 
cases already alluded to in which the transaction is 
more intricate and involved and requires an elab¬ 
oration in documentary form. 

Trade Price Lists 

These are not specific offers to sell, and an order 
based on a general trade price list does not consti¬ 
tute a contract. Such price lists are subject to with¬ 
drawal, revision or change without notice. 

Refusal to Sell 

It is not compulsory on a manufacturer or mer¬ 
chant to assign a reason for refusing to sell to any 
party wishing to buy. There are certain classes of 
business of a semi-public character which are for¬ 
bidden by law to discriminate, but outside of those 
that come under these regulations no control is ex¬ 
ercised. 


LEGAL ASPECTS OF PURCHASING 


211 


Returnable Packages 

In the absence of any agreement to the contrary 
it is customary for the buyer to deliver empty pack¬ 
ages to the seller at the delivery point at which they 
were originally received from the seller. They should 
be delivered in good condition within a reasonable 
time or within the time which may be specified in the 
contract. 

Variation in Quantities 

In the manufacture of certain small parts trade 
usage permits an over-run or under-run of approxi¬ 
mately ten per cent. If therefore the buyer must 
have exactly the number specified it must be so 
stipulated and agreed to by the seller. 

Misleading Statements 

If an agent or salesman makes untrue statements 
in negotiating a contract and secures business by 
such statements then the order is obtained by fraud 
and the material may be returned to the seller. They 
must however be returned within a reasonable time 
after the fraud is discovered. 

Authority of a Purchasing Agent 

If a purchasing agent should have private instruc¬ 
tions from his principals not to buy beyond a stipu¬ 
lated amount or not to close certain contracts without 
specific authority from his principals and he should 
disregard such private instructions his actions can¬ 
not be repudiated by his company. It is assumed 


212 


PURCHASING 


by those with whom he is negotiating that he is 
empowered to purchase the requirements of his 
company. His private instructions are not supposed 
to be divulged to a third party and he would appar¬ 
ently be acting within the scope of his authority as 
it is generally understood. 

Accepting and Shipping Portions Only 

When several items of merchandise are offered and 
a separate price named for each, it does not permit 
the buyer to accept some and reject others. If only 
a portion is ordered the seller’s acceptance must be 
secured before it can be considered that an agree¬ 
ment has been reached. Many purchasing agents 
make it a condition in the “ Request for quotation,” 
that it is optional to accept whole or part. 

An order also must be shipped complete and the 
buyer is not compelled to accept the material if only 
a portion is delivered. The order was an offer or 
acceptance of the whole quantity and to complete the 
contract it must be accepted and fulfilled intact. 

Payment 

The date on which goods must be paid for is reck¬ 
oned from the time the material was delivered at the 
f. o. b. point. If the delivery point is at destination 
the date of the invoice should be concurrent with 
arrival of goods at destination. It is a common prac¬ 
tice to date invoices the same day as shipment is 
made, although actual delivery may not take place 
for some time afterwards, depending on the time 
taken in transportation. 


<. CHAPTER XIV 


Purchasing for a Manufacturing and 
Construction Company 

I T is intended in this and the following chapters to 
briefly outline the purchasing routine of three 
systems. This chapter deals with a large corporation 
manufacturing elevators, escalators, mine hoisting ma¬ 
chinery, etc., with factories located in widely separated 
parts of the country. The product of these factories 
finds its way into every civilized country in the 
world, besides having an enormous domestic demand 
which is disposed of through offices situated in over 
eighty of the principal cities. 

The business of the undertaking comprehends not 
only the manufacturing of machines and apparatus, 
but also the erection of them, and the construction of 
the appurtenances necessary for their complete instal¬ 
lation. 

A service department is also maintained which 
comprises the work of inspection, repair, upkeep, and 
maintenance of elevators already erected, and the 
furnishing of necessary supplies. It undertakes the 
reconstruction of old and partially obsolete instal¬ 
lations, to bring them into conformation with the 
latest developments. The constant additions which 
are being made to the building laws in cities and 
the various state requirements governing factory 
buildings add considerably to the functions of this 
department. 


214 


PURCHASING 


It can readily be conceived that the purchasing con¬ 
nected with the multitudinous activities of such a 
concern is a complex problem and one involving an 
enormous amount of detail. The writer’s association 


CHAROe TO 

ACCOUNT NO. 

CLASS 

O 

o 

J 

< 

2 

0 

a 

0 

o 

Otis Elevator Company 

DATE 191 

PURCHASING AGENT: PLEASE ISSUE ORDER FOR THE rOLLOWINS FOR OEUIVERY 

CHARGING EACH ITEM TO ACCOUNTS INDICATED IN MARGIN 



















o 

DATE WANTED- 

TO RF UftFn FOR 

May, MIN. OR HFR 

FIN. IN STOCK ... FIN. ON flunPR 


RGM. IN STOCK RfiH . ON OROFO 

ARSFU. in KTOOV TOTAL AVAILARt F 


FIN. IN STOCK A RFC’D R1NC.F AMT. 

AT PSESENT 


NEEDED ON ORDERS TOTAL USED 

REMARKS_-___ 





APPROVED 

SIGNED DEPT. 

APPROVED 

FOAM »71 

FOR MANUFACTURING DEPT. FOR WORKS 


Figure No. 99.—Requisition from factories 


























































PURCHASING AS PRACTISED 


215 


with this work is an interesting and pleasant experi¬ 
ence and some of the methods used are related here 
and may be of service to the reader. 

The operations of the company covering such a wide 
area naturally entail the complete separation of all 
traffic work from the purchasing, and it is a distinct 
and important department comprising many functions 
in no way connected with the purchasing depart¬ 
ment. In fact, its principal work is related to ship¬ 
ments made on account of the sales department. 
It cannot, therefore, be considered as an integral part 
of the purchasing activities. An illustration will be 
given in the next chapter where traffic work is con¬ 
fined practically to purchasing alone and forms a 
constituent part of that department. 

The stores system is, similarly to the traffic work, 
segregated from the purchasing department and per¬ 
forms its important functions independently. The 
operations of this purchasing department therefore are 
confined to buying, and the methods employed are 
in contrast to the other examples given. 

The requisitions from the factories are shown in 
Figure 99. This form is sufficiently clear and needs 
no explanation; the arrangement and wording convey 
to any person with only a rudimentary knowledge 
of what a requisition is, its import and meaning. It 
has to be properly authenticated by the parties in 
authority and when thus validated forms the purchas¬ 
ing agent's authority for placing the order. 

Another form of requisition is shown in Figure 100. 
This is used by all the departments of the undertaking 
not connected with the actual manufacturing, for 


216 


PURCHASING 


supplies used by the construction and service depart¬ 
ments and in the offices. 

The purchase order, Figure 81, is in quadruplicate, 



the original going to the seller, one copy being kept in 
the purchasing department, one going to the factory, 
and one to the receiving department. The copy re¬ 
tained in the purchasing office is filed in a post binder 
and on it are recorded the invoices. It should be men¬ 
tioned that the copy going to the receiving department 
has on the reverse side an arrangement for recording 
the receipt of the goods (see Figure 102) and is retained 
in that department until the order is completed, when 
it is attached to the invoice. If more than one in¬ 
voice is rendered against an order a supplementary 
















PURCHASING AS PRACTISED 


217 


form is used for recording receipt of material which 
is attached to each invoice as they arrive. The final 
invoice completing the order is accompanied by the 
form shown in Figure No. 102. 


ORIGINAL 


o 

O s 


o | 

Uf 

(£ 

O 



PUT THIS 


Otis Elevator Company 

ORDER NO 

B 55290 

ELEVENTH AVENUE ANO 
TWENTY-SIXTH STREET 

ON YOUR 


INVOICE 


NEW YOB K 


101 


M 


PLEASE DELIVER TO OTIS ELEVATOR COMPANY 


SHIP VIA 


PLEASE NOTE: 

ACKNOWLEDGE AND ADVISE AT ONCE WHEN SHIPMENT WILL BE MADE. 
OUR ORDER NUMBER MUST APPEAR ON ALL INVOICES, PACKAGES- AND 
BILLS OF LADING AND THE PLACE TO WHICH MATERIAL HAS BEEN. SHIPPED 
MUST BE STATED ON INVOICE. 

SEND INVOICE TO THI9 OFFICE. ATTACHING B/L THERETO. 

WE WILL NOT IN ANY MANNER BE RESPONSIBLE FOR GOODS DELIVERED 
OR WORK DONE FOR OUR ACCOUNT WITHOUT A WRITTEN ORDER. 

NO ALLOWANCE FOR BOXING OR CARTAGE. 

OTIS ELEVATOR COMPANY. 


roNM ina 

REVISED.MAY I. 1911 


PURCHASING AGENT 


Figure No. 101.—Purchase order, 






218 


PURCHASING 


Contracts are made for fixed periods by the pur¬ 
chasing agent in New York for all materials which can 
be bought to advantage in this manner. Purchase 


KOnOtl A DETAILED REPORT OF THE GOODS MENTIONED ON THE OPPOSITE SIDE OFTHIS 
SHEET MUST BE MADE IN THE SPACE BELOW. PARTIAL RECEIPTS SHOULD BE REPORTED ON 
FORM 423. 



APPROVED. 

APPROVAL MUST BE BV MGR. OR SUPT. OR ONE DULY AUTHORIZED, 


Figure No. 102.—This is the reverse side of copy of order which is sent to 
receiving department. 


















PURCHASING AS PRACTISED 


219 


orders are issued both in New York and by the 
branch offices which apply on these contracts. 

The order form used by the branch offices is shown 


OPPIC* 


OTIS ELEVATOR COMPANY 

PURCHASE ORDER 

OATS 


o 

o 


NAM* 

ADDRESS 

PLEASE DELIVER TO 

BY 


NO. 


FOR 


NO. 


QUANTITY AND DESCRIPTION OF GOODS WANTED 


< 

z 

o 

DC 

O 


o 

o 


ORDERED BY 


APPROVED BY 


Figure No. 103.—Purchase order form used by branch offices. 













220 


PURCHASING 


in Figure 83. If the concern with whom the contract 
is made has local stocks in the cities where branch 
offices are located, the material is supplied from there, 


OTIS ELEVATOR COMPANY 

orrieeor 

PURCHASING AGENT 


REOUEST 

FOR 

QUOTATION 


PLEASE QUOTE ON THIS SHEET YOUR BEST PRICE F O B_ 


FOR THE ARTICLES SPECIFIED BELOW AND STATE HOW SOON YOU CAN FURNISH THE SAME 


BIO ON EACH ITEM SEPARATELY 


DO NOT FAIL TO SIGN THIS B!D 


Requisition 


SIGNATURE- 


Purchase Okoer 


Figure No. 104.—Form used in obtaining quotations. 




















PURCHASING AS PRACTISED 


221 


or from the nearest shipping point. A copy of this 
order is sent to the purchasing department in New 
York, where a record is kept of the total amount of 
material obtained on account of the contract. 



Figure No. 105.—This form is used in following up orders and obtaining 
from sellers information as to date of shipment. 





























222 


PURCHASING 


The branch offices are advised of all contracts 
made, and all changes and modifications which take 
place from time to time. As they are engaged in 
local erection, construction, and repair work, it is an 
important advantage for them to be able to secure 
the benefits of these contracts. They are placed 
in the same position as the largest buyers for such 
material as they need locally and which can be cov¬ 
ered by agreements of this kind. Contracts of this 
character, which can be arranged by the purchasing 
agent, are important factors in the general economic 
operation of the corporation's undertakings. 

The invoices for all factory purchases go first to 
the purchasing department in New York, where 
they are compared with the order and sent to the 
factories for approval. A record of the receipt of 
material is made by the receiving department on the 
reverse side of their copy of the purchase order (see 
Figure 102. This copy of the order is then attached to 
the invoice and returned to the purchasing department. 
It will be noticed that Figure 102 covers all the necessary 
data connected with the invoice, such as classification, 
freight charges, etc. A slip, is attached to invoices call¬ 
ing attention to cash discounts, and each person handling 
them must perform his work to enable payment to be 
made on date specified. After prices have been checked, 
the invoices are passed to the accountant's office. 

These are the salient features connected with the 
purchasing system of this undertaking. There are many 
details associated with it, as there is with any similar 
work. There are also forms used between the fac¬ 
tories, branch offices and purchasing department which 
it is unnecessary to give here. 


PURCHASING AS PRACTISED 223 


KJ\ 

A 

Vf 

/t 

n 

w 

0 

0 

V 

m 

y 

w 

K 

A 

• 

• 

z 

■ 

0 

t 




u y 

l°l 




















0 

► 

M 

0 

s 

< 

I 

„ 0 




















J 

< 

a 

u 

i- 

< 

2 




















►y) 

»- H * 
I2 n 

o< o 

jQO 




















s 

J 

J 

lii 

in 




















► « 

jUO 

uOZ 

°r 




















°°S 




















c 

U 

0 

S5 

K 

3 

0 






















Figure No. 106.—Purchase order record. 

































































CHAPTER XV 


Purchasing for Construction Work and Operation 
of Properties in Widely Separated Localities 

T HERE are conditions existing in the work of 
purchasing which are not covered by the de¬ 
scriptions given in either of the two preceding chap¬ 
ters. As pointed out in earlier portions of this book, 
there are certain fundamental principles connected 
with buying which are common to it whenever and 
wherever its functions are exercised. The methods 
employed, however, have to be adjusted to meet 
the varying conditions which surround the work. 

The writer has in mind one of the largest engineer¬ 
ing concerns in the country with whose purchasing 
he had the good fortune to be connected. This 
company has carried out construction contracts in 
practically every state in the Union, also in Cuba, 
Central America, the Philippine Islands, and its allied 
companies have executed contracts in all parts of 
the world. 

They also act as managers and operators of public 
utility undertakings and many other enterprises, both 
at home and abroad. In addition to these important 
functions, there are many companies who find it 
advantageous to employ them to act as purchasing 
agents for them on account of the excellent facilities 
they possess for satisfactorily taking care of such 
work. 


224 


PURCHASING AS PRACTISED 


225 


From this short resume of the activities of the cor¬ 
poration, it can be easily understood that the work 
of purchasing all the requirements connected with 
so many undertakings is an exceptionally intricate 
problem. The proper performance of the work of 
buying where the conditions and circumstances vary 
so greatly involves something radically different from 
the examples given in the two last chapters. 

The information which reaches the purchasing office 
and which primarily forms the basis for the purchase 
may be in a very incomplete and crude form. This 
necessitates the apportioning of the work connected 
with the requisition to an experienced man, who takes 
all the information furnished and beats it into shape. 

The requisition form used (see Figure 107) is much 
larger than those previously shown, and the clerk 
in charge has to write up the requisition specifying 
and minutely describing every detail and particular 
requisite to insure the purchase being made and the 
material shipped exactly in accordance with the re¬ 
quirements of the customer for whom they are acting 
as purchasing agents, or as needed for the execution 
of work on contracts for construction or operation. 

In considering a requisition such as this, the nature 
and character of the purchases as already outlined 
must be taken into consideration. It is a foregone 
conclusion that when the material is to be shipped, 
perhaps half-way round the world, special care must be 
taken in making the purchase and having every detail 
connected with it and its shipment absolutely correct. 

All the work connected with traffic problems in this 
establishment is an integral part of the purchasing 
department, and all the particulars as to manner of 


226 


PURCHASING 


packing, routing, etc., have to be decided by the 
traffic clerk if not unequivocally specified by the con¬ 
signee, and even then is subject to this checking and 
approval. 



Figure No. 107.—Requisition form. 
































PURCHASING AS PRACTISED 


227 


Trivial purchases, such as frequently occur in local 
construction and manufacturing work, are not as 
general in transactions of this purchasing department, 
but they are large and important and practically all 
of them are subject to inspection when shipments have 
to be made great distances. It is easily conceivable 
that there must be positive safeguards against ship¬ 
ping wrong material, and an endeavor has been made, 
therefore, to show the necessity of preparing the requi¬ 
sitions so that all questions as to proper description 
of material, its inspection and routing are adequately 
covered and accurately specified. 

In an office handling such a varied assortment of 
purchases, the information on file is naturally exten¬ 
sive and diversified. It is not possible, however, nor 
could it be expected, that the department should 
know where to buy to the best advantages everything 
embraced in its multitudinous activities. Neverthe¬ 
less, it must be in a position to obtain at short notice 
such information as is essential to enable it to make 
the purchase intelligently and satisfactorily of any¬ 
thing unusual which it is called upon to buy. As an 
illustration, the writer remembers having to investi¬ 
gate and find a market in which to purchase machin¬ 
ery for harvesting rice and hemp and preparing them 
for commercial use. This transaction was for the 
Philippines, while at the same time mules were being 
bought for construction work in Tennessee and loco¬ 
motives for Cuba. 

In its completed form and when properly approved, 
the requisition is ready to be dealt with by the pur¬ 
chasing agent, who scrutinizes it closely, for the 
magnitude and importance of the expenditures in- 


228 


PURCHASING 


volved would, as already pointed out, entail severe 
losses, trouble, and inconvenience to both the pur¬ 
chaser and the consignee if the transaction was not 
properly carried through in consequence of the requi¬ 
sition being carelessly or incorrectly written up. 

It is necessary also to verify the authorization of 
the purchase, and that it is validated by the existing 
agreements or arrangements for carrying out con¬ 
struction work, management, or operation of properties, 
or in the performance of the function of purchasing 
agent for corporations who have not got the requisite 
facilities for doing such work to the best advantage. 

The requisition is then handed to the price clerk 
who writes up and sends out the invitations to ten¬ 
der. The work in connection with this phase of the 
purchase, also in comparing quotations and final 
negotiations before placing the order, does not differ 
materially from similar work as related in previous 
chapters. This is also the case with all the features 
pertaining to the following up of the order, inspecting 
of the material, and shipment to customer. 

A few of the forms used in carrying through the 
routine work of the department are illustrated in the 
following pages. The nature of the particular section 
of the work in which they are used can readily be 
gathered from an examination of the forms them¬ 
selves and it is not necessary to detail the method of 
handling each one. 

The system of filing the papers in one of the 
transactions of the character described has to be 
radically different from that used by the Underground 
Railways, where over one hundred orders were fre¬ 
quently issued in one day, many of them having no 


PURCHASING AS PRACTISED 


229 


1 


Pqrm Wo f; J0» Pa 


AkQ NO. 


THE J. 6. mil EJRiftEBItt MRPOMTNfc 

EN3INEZR9. CONTRACTOR®. 

-fJIICHAIINa AOCNTS- 

43 EXCHANGE PLACE NEW YORK. N. V. 


ONOCH NO. 


OATE . 




ORDER 


ORDERED FOR. 


TO. 


PLEASC FURNISH THE FOLLOWING ARTICLE* SUBJECT TO THE CONDITION* 6 TAT to HEREIN 
CONSIGN! O TO --.-- - . - 


MARKS 


CARE OF. 


SHIPMENT MUST BE MADE WITHIN. 


.PROM OATE 


CONDITION* 


ITEM 

NUMBER 


QUANTITY 


ARTICLES AND DESCRIPTION 


1 If shipment cannot bo made by date specified, 
notifj us at once 

2- Order number must be shown on *11 shipping 
documents, invoices and correspondence. 

3 Invoices, as specified below, roust be sent to 
this office as soon as material is shipped ffom 
your works All goods from manufacturers 
in Greater New York, should be held pending 
receipt of shipping instructions. 

4. All material furnished must conform with our 
SPECIFICATION S when Indicated, and if not 
in accordance therewith, same will be held at 
your risk, awaiting disposition. Shippers 
must pay all transportation charges both ways 
on all rejected material. 

5- Inspection b> us before shipment does not 

relieve shipper or manufacturer from responsi¬ 
bility of furnishing material strictly in accord¬ 
ance with specifications. 

6- All material must be packed securely. Break¬ 

age or damage will be charged to shipper 

7 No charges allowed for packing, reels or cartage 
unless specified on this order. 

8. Form below must be detached, filled out and 
forwarded to us immediately. 

9- No drafts will be honored. 


10. Railroad hill lading showing proper classifi¬ 
cation, full routing, car number, weights 
and rates must he sent to (as indicated at 
top of this order) as soon as shipment is 
made. 


ACQUIRED 


.COPIES OF INVOICE TERMS OF PAYMENT. 

CORIES OF PACKING LIST 


YOURS VERY TRULY 

THE J. 6. WHITE EHStlEEKIIS COaPORATIM, 

•RUftCMARIH* **KNT- 


Per 


DITACH AND MAIL AT ONCE TO 

THE J «. WHITE EBSIHUMG CQ8HJMTIM. 

43 EXCHANGE PLACE. 

NEW YORK 


ORDER NO- 


RECEIPT OF THE ABOVE ORDER IS MEREBV ACKNOWLSOSEQ. M ACCEPT THE ORDER AS SPECIFIED. 


.SIGNED . 


DATE . 


Figure No. 108.—Purchase order form 















































230 


PURCHASING 


papers, correspondence, or documents connected with 
them to be preserved. But with such orders as these 
the number is comparatively small, but frequently 
includes a voluminous quantity of correspondence, 



Figure No. 109.—Copy of purchase order retained in office showing 
method of recording invoices. 
































PURCHASING AS PRACTISED 


231 


memorandums, quotations, etc., which for easy refer¬ 
ence must be kept together. Therefore all papers 
relating to the order, together with requisition, from 


Form No. -TO 9000 1 29-19 


THE J. 6. WHITE ENGINEERING C0RP0RATIQ1 

ENGINEERS CONTRACTORS 
49 EXCHANGE PLACE. 

NEW YORK. 


19 



Gentlemen i 

ORDER No.--CONTRACT-.- 

Plcare refer to our order of the above number and place hereon, in space allotted below, 
your very best quotation covering the items included in the order. 

Yours very truly, 

THE J. G. WHITE ENGINEERING CORPORATION 

E. f*. CHILSON 

Manager of Purchasks 

By--- 

THE J. 0. WHITE ENGINEERING CORPORATION 
Gentlemen » 

We quote below our very best prices covering the items mentioned on your order 
of the above number. 

Item No. Unit Price Total Price 


Yours very truly, 


Figure No. 110.—When an order has been issued without first ascertaining 
the price, this request is sent to the party holding the order. 

















232 


PURCHASING 


the initial stage to its final completion, are kept in a 
folder. Such a scheme is not feasible or practicable 

Form No. 313A 500.12-MO 

Prints and Specifications to be sent out 

To Engineering Department Date.Number,.. 

Order has been placed with... 

For____ 

To be used on the.job 

Please see that all the Prints and Specifications covering this 
work are sent immediately. 


Purchasing Department. 


Domestic Prints 

To Purchasing Department Number,... 

Prints and Specifications have been forwarded to.. 

For,......... 

To be used on the.........job 

Date. .... L 

Engineering Department. 


Figure No. 111.—When an order is placed which requires blue prints and 
specifications this form is sent to the engineering department. 

























PURCHASING AS PRACTISED 


233 


when very large numbers of orders are issued which 
have few or no papers connected with them to be 
preserved. 


fORM NO. 317. 2M-4-11-11. 

INSPECTION NOTICE 


Contract.. Order no__ 

Engineering Department 

OFFICE DATE .... 


Manufacturer advises that material on the above 

ORDER W,L ,s be ready for inspection at.... 

... DATE. f .. 

PURCHASING DEPARTMENT 

By... 


INSPECTION NOTICE 

CONTRACT. ORDER NO....„...-. 

Purchasing Department 

OFFICE DATE . 


WE WILL ARR AN? v E e FOR INSPECTION OF MATERIAL ON THE 


ABOVE ORDER. 


ENGINEERING DEPARTMENT 
BY. 


Figure No. 112.—When inspection has been specified on order, this form 
is sent to engineering department. 
















234 


PURCHASING 


Form 807-2000-1-M-lS 


ORDER TRACER. 


THE J. 6. WHITE ENGINEERING CORPORATION 

ENGINEERS CONTRACTORS 
49 EXCHANGE PLACE, 

NEW YORK 


R US 


NEW YORK. 


si ntt 


ORDER NO.. 


.CONTRACT. 


WE MU9T BE ADVISED IMMEDIATELY WHEN YOU PROPOSE MAKING SHIPMENT OF THE MATERIAL CALLED FOR 


IF ANY OF THE ABOVE HAS BEEN SHIPPED. PLEASE ADVISE: 


VOUR9 VERY TRULY. 

E. N. CHILSON 

Manager op Purchases 


DATE OF SHIPMENT. 


. SHIPPING POINT . 


CAR INITIALS AND NUMBER.. 


VIA 


EXPRESS. 


REMARKS: 


CHIPPER. 


Date., 




Figure 

of 


No. 113.—Form used in requesting information regarding shipment 
order. 






























PURCHASING AS PRACTISED 


235 


rmm He. ui-joo«-j-m 


MEMORANDUM 

TO 

ORDER FOLLOW-UP CLERK 


| BY LETTER 

Order was placed S by telephone 

l VERBALLY 

Date_ 

With_ 

Materiai_ 

Contract_ 

Shipment Due_ 

Signed_ 


Note.—This memorandum Is (or temporary use In following shipments. After regular order Is Issued and 
card Is made up, the order number Is to be noted below and this memorandum will be hied with the order. 


COVERED BY ORDER NO. 
FOLLOWUP RECORD 


Figure No. 114.—When an order has been placed verbally and before 
the official order is issued, this form is used for temporary follow-up 
purposes. 













236 


PURCHASING 


«*.* »o HI. !M* ■& II 

MEMORANDUM FOR FIELD OFFICE 

Date. 

Const auction Office 


Gentlemen 

Order Nn Contract--■ ...___ ■ . . 

Shipment of material covered by our order of the above -number has been r> ouse» 
us follow*:— 


Figure No. 115. —Advice to construction office regarding shipment of material. 


IKE J. 6. WHITE ER6IKEERIKS CORPORATION 

CNOINCERSCONTRACTORS, 

43 CXCNANOK PLACE 
NEW YORK 


191. 


To 


Please deliver to S.S. 
now loading at___ 


_„_for shipment to_ 

Please have all packages marked in full, as per in¬ 
structions given In our order, take receipt in our name and for-'' 
ward to us when delivery has been made. 


Please number packages as follows: 

Tours truly. 


Manager of Purchases. 


Figure No. 116.—Advice to supplier regarding shipment of an order by 
steamship. 


















PURCHASING AS PRACTISED 


237 


POSH HO- m SOO-S 10-19 

IK k 6. WHITE EI6IREE8IR6 WRPORATlOa 

ENGINEERS CONTRACTORS IMPORTANT 

49 EXCHANGE PLACE. 

NEW YORK 

NEW YORK._;_ _ _t»f 

TRACER REQUEST 

TO______ 


GENTLEMEN; 

PLEASE WIRE TRACE SHIPMENT FORWARDED_ 




CONSISTING OP ... . ............-... . , ■ .. 

AS WE ARE ADVISED BY CONSIGNEE UNDER DATE OP___—-- --, 

THAT SHIPMENT HAS NOT YET BEEN RECEIVED. PLEASE ADVISE IMMEDIATELY BY TELEPHONE OR TELEGRAPH 

WAY-BILLING REFERENCES. CONNECTING LINES. DATE OF DELIVERY. ETC. 

Very truly yours* 

THE J. & WHITE ENGINEERING CORPORATION 

C. N. CHILSON. MANAGER OF PURCHASES 

PER.---- 


Figure No. 117—Tracer request. One of the forms used by the traffic clerl 


PT 




































238 


PURCHASING 


Form No. 320 1-22.13 

THE J. G. WHITE ENGINEERING CORPORATION 

ENGINEERS CONTRACTORS 
43 EXCHANGE PLACE 
N EW YORK 


PURCHASING DEPARTMENT 

_19 


Gentle ken i 

ORDER No_CONTRACT- 

We return herewith your invoices ns follows: 

Number Date Amount 


Please follow invoicing instructions on order of the above number, forwarding 
Invoices and. copies In accordance therewith. 

Venn very truly, 

JHE I. ft WHITE EHCINEESWG CC3TO5ATICS 

E N. CMILSON 

Kaxa«m of Pursham* 

b,-. 


Figure No. 118 —When invoices are not rendered in accordance with 
instructions they are returned with this notice. 












PURCHASING AS PRACTISED 


239 


r«_N».ui woe it a-ii 


MEMORANDUM for FIELD OFFICE 

INVOICES 

Dati- 


CONSTRUCTION OFFICE 


Gt.'rrLtMEN: 

ORDER No..-.__..-CONTRACT... 


We attach hereto-———-:.....—___- 

of the followinf invoices to be treated ia the usual manner.— 

Shipper Invoice Date Invoice Amount 


Discount of 


-% applies if payment is made within..days from. 


Very truly yours, 


E. N. CHILSGN 


Figure No. 119.—Form used in sending invoices to construction offices 
for approval. 






















240 


PURCHASING 


T MONTH 191 

REMARK8 
































—1 

COMPLETED 

































COST 

































































































































































































MATERIAL 

— - - - 

































PLACED WITH 

































Form No. 310. 100014-7-14, 

CONTRAC 

?! 

T 

«n 

































SHIPMENT MADE 

































SHIPMEN 

1 DUE 

































UJ 

b- 

< 

O 

































o 

z 

cc 

bj 

o 

a. 

2 . 



































































Figure No. 120.—Purchase order record. 


































































INVOICE REGISTER 

MONTH OP 


PURCHASING AS PRACTISED 


241 


• 

0 

z 

h 

RECEIVED 8Y 
































u. 

h- 

< 

c 

PASSED 
































ICE REGISTER 

MONTH OF SHE t 

APPROVAL 

Ul 
UI Z 

55 

o *- 

Ul 

ft 
































SENT 

TO 
































CONTRACT 
































ORDER NC. 
































rendered TO 
































AMOUNT 































































Form No. 326. 10003-30-14 

INVOI 





























































































































INVOICE RENDERED BY 

















- 















INVOICE 

NUMBER 
































DATE OF 
INVOICE 
































INVOICE 

RECEIVED 

































( 


' 






















; 

L 







Figure No. 121.—Invoice register. 












































































































CHAPTER XVI 


Purchasing for a Small Manufacturing Plant 

I N a small manufacturing plant the conditions 
surrounding the purchasing and store keeping differ 
somewhat from those previously related. The fol¬ 
lowing brief explanation will serve to illustrate the 
main features of the system adopted. Owing to the 
size of the plant and the limited amount of clerical 
assistance, it had to be simple in the extreme and 
yet meet the problems of purchasing and store keeping 
satisfactorily. On this account the forms used were 
limited in number and any features which might 
lead to complications or enlarge the work were 
avoided. 

The storeroom was in charge of a man who was 
honest and reliable, but who was not capable of keep¬ 
ing any of the stores accounting records, which were 
all kept in the main office. He had no authority to 
issue purchase requisitions, he received material and 
supplies, stored them, and delivered them on fore¬ 
men’s requisitions as required, doing the physical work 
himself with an assistant. If any additional tempo¬ 
rary help was needed it was drawn from the shop. 

When a production order was issued, the superin¬ 
tendent or his assistant made out a purchase requisi¬ 
tion, Figure 122, for the material required. This was 
in duplicate and both original and copy were sent 
to the office. Here it was checked up with the stores 

242 


PURCHASE REQUISITION 


PURCHASING AS PRACTISED 


243 


0 

z 

c 

Li 

0 0 

Z a. 



D O 

O C 

LJ D 

a. n 



0 

u 

c 

LI 

0 

a. 

0 


< 

E 

uj 

h 

< 

2 


Q 

Id 

z 

0 


[L 

0 

z 

0 

h 

Q. 

££ 

O 

Ifi 

LJ 

Q 


n 

o 

2 

K 

0 

Ik 


a. 

o 

lL 


111 

h 

< 

Q 


Q 

LJ 

o: 

5 

o 

LI 

K 


0 

LJ 

I- 

Z 

< 

$ 

LJ 

h 

< 

Q 




Figure No. 122.—Purchase requisition. 






























244 


PURCHASING 


perpetual inventory to see whether any of the mate¬ 
rial in stock could be used for this order. It was then 
numbered with an automatic numbering stamp and 
investigations were made as to prices, etc. After 
the order was placed, the original was kept in the of¬ 
fice and the copy returned to the superintendent. 
On both of them the order number and name of seller 
were inserted. This fitted in better with the super¬ 
intendent’s method of keeping his records than if 
a copy of the purchase order had been sent to him, 
which would only have meant to him an unnecessary 
addition to his clerical work. 

Requisitions for supplies for the shop were issued 
by the superintendent’s assistant when he was notified 
by the office or by the storekeeper that the stock was 
running low and had reached the limit fixed. When 
new machinery was designed, the drafting room made 



Figure No. 123. —Card for recording prices of material with names of 
suppliers and order numbers. 






















PURCHASING AS PRACTISED 245 

out a bill of material and a requisition for it at the 
same time. These requisitions came into the office 
and were dealt with in the same manner as those 
from the superintendent. 

A record of quotations and prices paid for previous 
purchases was kept on a card index, Figure 103. 
Reference was made to this to ascertain the latest 


to 

v— 

m 


o 

o 

z 

o 

h 

o 

D 

a 

h 

(/) 

Z 

0 

o 



O O 


O O 


Figure No. 124. —Purchase order form. 










246 


PURCHASING 


price and if no recent quotations had been received, 
inquiries were sent out for best prices and shipping 
dates. When a satisfactory price had been secured 
and shipment promised early enough for the proper 
execution of the production order, the regular pur¬ 
chase order was issued, Figure 124. A copy of this 
order was sent to the storekeeper (no price was in¬ 
serted on this copy); a copy was also kept in the 
office and bound in a metal post binder. 

When the invoice was received, it was checked 
with the order and a memorandum of the date of in¬ 
voice, quantity shipped, and amount of invoice was en- 



Figure No. 125.—Approval form for invoices. 

































PURCHASING AS PRACTISED 


247 


tered on the face of the copy of the order in the office. 
This was found an effectual check against approving 
two invoices for the same material. It also pre¬ 
vented more goods being delivered than the order 
called for. These are two things which need close 
watching in both small and large establishments. It 
is a practice of the accountants for large concerns 
to take all properly approved invoices and make a 
voucher for them. They may have no effectual 
means of detecting or knowing that two of them 
are duplicates. It is entirely up to the purchasing 
agent to prevent this with proper safeguards. In 
a small business the same trouble occurs because 
the bookkeeper takes all invoices as they are ap¬ 
proved arid enters them in his ledger irrespective of 
dates. At the end of the month a pay statement 



Figure No. 126.—Index card for orders, the supplier's name being inserted 
at the top. 
































248 


PURCHASING 


with list of invoices is made out and not being in order 
of dates it is not noticed that there are two invoices 
of the same date and amount. The most effectual 
method of preventing duplication of this kind is to 
enter the invoice on the copy of the order in the office. 
Investigations were then made to see if any questions 
had arisen regarding the quality which would appear 
when it was checked against the material-received 
sheet. It was also checked for price, the extensions were 
checked, and it was finally approved on a form as 
shown in Figure 125. 

A record of prices was kept on cards similar to 
Figure 123 and an index was kept of orders placed on a 
form as shown in Figure 126. The copies of unfilled 
orders were kept separate from the completed orders 
and as they were comparatively few a general tickler 
system was not necessary, as notes could be easily 
made of follow-up movements on the copies of the 
orders themselves. 

The stores system in connection with this plant was 
simple in the extreme. The man in charge did no 
clerical work except make out a list of the material 
and supplies received on account of purchase orders. 
A copy of this order was given to him at the time it 
was issued; he knew therefore what goods were on 
order, when to expect them, and could stop any coming 
in which were not properly ordered. 

The method of procedure was as follows: The 
material arrived daily from various sources and on 
arrival was checked, weighed, and examined by the 
storekeeper, the copy of the purchase order having of 
course been referred to. He then entered these items 
on the material-received sheet, which was sent into the 


PURCHASING AS PRACTISED 


249 


office every day. He had various shipping mem¬ 
oranda and delivery tickets which came with the 
goods. These he kept for a time in case any question 
should arise as to quantities, etc., when invoices were 
checked. 

During the day the storekeeper was called on con¬ 
tinually to deliver goods from the storeroom to various 
departments. This was done by requisition, Figure 
127, signed by the foreman. The first thing the store¬ 
keeper did on receipt of this requisition was to num¬ 
ber it in the top right-hand corner with an automatic 
numbering stamp. He then handed out the material 
and signed the ticket below the foreman’s signature. 
The requisitions were placed in a box and sent into 
the office daily. The object of numbering them was 



Figure No. 127.—Foreman’s requisition on storekeeper. 
























250 


PURCHASING 


that it proved to the office that if the requisitions 
were numbered in proper sequence none were lost 
after material was given out. The foremen could 
not be depended upon to send copies of requisitions 
to the office to check with the originals as is frequently 
done. It was essential therefore that close track be 
kept of them. 

Material returned to stores was recorded in a simi¬ 
lar manner, the foremen sending credit memorandums 
to the storekeeper (see Figure 128). 

On arrival in the office these requisitions were 
charged against the production order and also entered 
on stores record, Figure 129, which was a loose-leaf 
sheet. They were then tied in bundles and kept 


FORM 103 

G< 

ORDER NO. 

CREDIT 

DOOS RETURNED TO STOCK ROOM FOR CREDIT 


PIECES 

FEET 

POUNDS 

MATERIAL 





























ENTERED IN STOCK 1 

CREDITED TO ORDER 

=»OOK FOREMAN 

STOrKKEEPER 



Figure No. 128.—Foreman’s credit requisition for material returned to stores 






















RECEIVED 


PURCHASING AS PRACTISED 251 



Figure No. 129.—Perpetual stores record. 







































































































































252 


PURCHASING 


until there was no possibility of any need to refer 
to them again. 

For the size of the establishment a large number 
of patterns were in use. A record of these was kept 
on cards, one being a record of the pattern itself, 
Figure 131; this was a buff card. The other was light 
blue, Figure 132, and was used for keeping a record 
of the foundry the patterns were sent to. Enough 
particulars are shown in the illustrations of these to 
make them self-explanatory. 


FORM 104 

DATE_191_ 

TO THE SUPERINTENDENT, 

THE STOCK OF_ 

PATTERN NO_NOW STANDS AT_ 

THE MINIMUM BEING_IT TOOK_ 

TO GET DELIVERY OF LAST LOT PURCHASED. 


Figure No. 130.—Storekeeper’s notice to superintendent 
of low stock. 










PURCHASING AS PRACTISED 


253 



Figure No. 131 .—Card for keeping record of patterns. 





















254 


PURCHASING 



Figure No. 132.—Companion card to Figure No. 131 for recording movements of patterns. 




























INDEX 


Analyses, relation to buying, 92 
value of, 90 
Art of Buying, 1 

Buyer and seller, 21 
Buying. (See also Purchasing) 
literature of, 16 

Catalogue, cases and shelves for 
filing, 76, 79 
index cards for, 77, 78 
numbering and indexing, 76 
utility of, 75 
Competitive Bidding, 23 
Costs, as affected by buying, 13, 
14, 15 

Contracts, and price fluctuations, 22 
and trade price lists, 210 
charges in, 206 
date of delivery on, 208 
definition of, 213 
forms of, 137, 138, 139, 140, 
141, 142 

form of order applying on, 143 
record, 144, 145 
general remarks, 136 
made through agents, 206 
offers to, 204 

orders and acceptances, 210 
payments on, 213 
place of delivery on, 208 
shipping part only, 212 
specifying quality in, 207 
time limits on, 205 
variation in quantity, 211 

Data, chart of procedure in collect¬ 
ing, 66 

collecting and recording, 73 
necessary in purchasing office, 74 


Discounts, advantage of securing, 
147 

reminder form for, 151 

Economics of Purchasing, 9 
Ethical Standards, in purchasing, 19 
Ethics of Buying, 21 
buyer and seller, 21 
competitive bidding, 23 
general remarks, 19 

Freight Charges, checking, 162 
Functional Position of Purchasing, 11 

Influence on Profits, 15 
Information, chart of method for 
securing, 30 
clerk, 56 

which should be on file, 73 
Inspection Report, 157 
Inspection, copy of order, 177 
notices, 234 

Inspector, his duties, 58 
Invoice Clerk, his duties, 56, 58 
Invoices, approval of, 164 
certifying, 152, 160 
checking extensions, 164 
checking freight charges on, 162 
checking prices on, 161 
checking with material received, 
158, 159, 160 
checking with order, 155 
classification, 164 
debits against, 163 
discount on, 151 
form for certifying, 153, 154 
general remarks, 147, 148 
methods of handling, 146 
not rendered as instructed, 239 


256 


INDEX 


Invoices, 

preliminary work on, 151 
record, 150, 152, 242 
recording, 149 

Legal Aspects of Purchasing, 203 

Literature of Buying, 16 

Misrepresentation, and its results, 22 

Offer system on buying, 24, 

Order Clerk, 58 

Orders, acknowledgement of, 125 
chart of procedure in placing, 67 
emergency, 134 
filing, 116, 131 

following up, 117, 125, 126, 127, 

129, 222, 235 

forms for branch offices, 220 
forms of, 118, 119, 121, 122, 123, 
124, 130, 218, 230, 246 
method of handling, 114 
obtaining price after placing, 
232 

record of, 224, 241, 248 
recording shipments on, 128, 

130, 132, 133, 156 
work connected with, 114 

Organization, chart of, 57 
information clerk, 56 
inspectors, 58 
invoice clerks, 58 
linking up employees, 55 
of department, 53 
personnel of, 53 
price clerk, 57 
requisition clerk, 56 
storekeeper, 59 
traffic clerk, 58 

Patterns, form for recording, 254, 255 
storing, 253 

Payments, advantages of prompt, 23 

Personality in buying, 7 

Philosophy, disadvantage of buying 
from one source, 6 
obtaining right material, 5 


Philosophy, 

of buying, 4 

price and quality considered, 4 
Price Clerk, 57 

Prices, checking on invoices. (See 
Invoices) 

fluctuations in, 22 
obtaining after order is placed, 
232 

Principles, of purchasing, 1 
Profits, influenced by buying, 15 
Prompt Payments, 23 
Purchases, made in the past, 82 
nature of, 31 
recording, 83, 84, 85 
substitutes offered for, 34 
Purchasing Agent, character and 
make up, 28 
authority of, 212 
definition of authority, 36 
diagram of his work, 35 
factors and conditions connected 
with his work, 26 
functions covered by his activi¬ 
ties, 34 

matters on which he should be 
posted, 29 

relations with other depart¬ 
ments, 38 

synopsis of information neces¬ 
sary to, 30 

Purchasing, an interesting economic 
study, 9 
art of, 1 

comparison of inefficient and 
competent methods, 3 
ethical standards in, 19 
functional position of, 11 
influence on profits, 15 
literature on, 16 
personality in, 7 
philosophy of, 4 
principles of, 1 

relation to cost and selling, 13 
some present-day methods, 8 
success due to, 11 


INDEX 


257 


Purchasing Department, chart of 
functional organization, 48 
communications between de¬ 
partments, 40 
employees of, 45 
inspection division of, 50 
looking up employees, 55 
organization of, 53 
origin of, 41, 53 
personnel of, 53 
receiving division of, 50 
relations with other depart¬ 
ments, 46 
size of, 44 

sphere of usefulness, 41 
stores division of, 50 
subdivisions of, 47 

Quotations, comparison of, 111 
declining, 112 

form for obtaining, 104,107, 108, 
220 

keeping record of, 89 
negotiations regarding, 110 
obtaining, 103 
tabulating, 90 
telephone request for, 109 

Receiving material, records of, 128, 
130, 133 

Records, analyses of, 92 
inspection reports, 92 
past purchases, 82, 83, 84 
purchase orders, 85, 86, 88 
quotations, 89, 90 
sources of supply, 78 
specifications, 89 
tabulating, 73 
tests, 92 

Refusal to sell, 210 

Relation, of buying to costs, 13 

Requisition Clerk, 56 

Requisitions, chart of procedure, 67 
factory, 95 

forms of, 96, 97, 99, 102, 105, 
106, 215, 217, 227, 244 


Requisitions, 
pricing, 101 
Remarks regarding, 94 
Returnable packages, 211 

Scrap, disposal of, 199, 201 
Sellers, recording standing of, 80, 81 
Selling Prices, in relation to buying, 
16 

Sources of Supply, form for record¬ 
ing, 81, 94 

necessity for information of, 78 
Specifications, essential to good buy¬ 
ing, 2 

importance of proper, 89 
standardizing, 91 

Storekeeper, his duties defined, 59 
Stores, accounts, 189 
bin tickets, 195 
budget system, 187 
controlling maximum and mini¬ 
mum, 198, 200, 253 
credits to, 183, 184, 251 
deliveries from, 181 
inventory, 190, 192, 193, 194, 
258 

material required for, 185, 186, 
188 

operation of, 166 
proper facilities, 179 
receiving material into, 167, 168, 
169 170 

receiving report, 173, 174, 175, 
176, 178 

requisition on, 180, 181, 182, 250 
tickler systems, 196, 197 
Supplies, standardizing, 43, 91 
System of Procedure, chart dealing 
with invoices, 68 
chart of stores, 70 
chart of system, 66 
chart purchasing, 67 
in collecting data and informa¬ 
tion, 65 

in dealing with invoices, 69 
in purchasing, 67 


258 


INDEX 


System of Procedure, 
inspection, 71 
in stores, 69 
traffic, 71 

Tabulation of bids, form for, 100 
Testing materials, value of, 92 


Tickler Systems, 125, 126, 127 
Traffic clerk, 58 

Traffic, division of purchasing de¬ 
partment, 49 
economic possibilities, 49 
method of procedure, 50 
tracer request, 238 


BUSINESS BOOKS 


We have on our shelves the 
noteworthy publications of 
all publishers of books on 


Accounting 
Advertising 
Business Law 
Credits 


Collections 
General Business 
Salesmanship 
Scientific Management 


and other subjects of inter¬ 
est to the business man. 


Inquiries by mail, telephone, or in 
person, will receive prompt, courte¬ 
ous, and careful attention, and de¬ 
scriptive catalogs mailed on request. 


D. VAN NOSTRAND COMPANY 


PUBLISHERS AND BOOKSELLERS 
8 WARREN STREET - - NEW YORK 























nl: III I 


imuni r 


ii l ; |i ! m, liM |||||j|j|ji;ij ififjipf 

III I! i || i;!!!ih . ill! I; j |Ifii;; ^ 

l : I! j i ? > ! 1 : ' N l ' 1 '' : : a j! 

M lj. ilj- 

.!!M i I li Ml :n : ;: ii Ain I ^ilii ^ 


LIBRARY OF CONGRESS 



0 040 055 009 8 


; .i jiI{| J i ; i:; ; . •• iilj'ii •. • ;■? : . '• 

i. ,{ fi; : .:!]•: 

IB il l' 

I ! Ill !i Hill I : 






ii: J! • ' ;iij: i: • • » 1 V. 

; jlhMlI ■ ; : • Jliiiii j !!! jj i li = . : ■ i.ljhij i 

jjj | I !j|!iii||i|!| |l:: ; J jI! Irl - :lj|l H 
? : li ! ! H H -ill i I I H it i H I Mil i in: ! 


! I |l| m ! pil l li 

H it 


. | |j I | ! || j j|! [iA 

ill ii UIBI filllil HI 11 i ♦ IIJ ttt t ! H t i 


liii j!i 

lil i i 


fill 1 )1 ill 

! Illl; {II 
: 1:: 

:! iiiiil ; :;ii 'i ■ 
in^ni iliin::^ nv |.i 
!•; ii h ! iti !! iii-13! -Im 


IHHUHliilnnih liiHijllllNlIll) i! 
















p i 

..14, m ! 

: } M i 1 J -J j Mill 










ll li 




;j i4i M 




I P | 






• C : { ' i ! | 

I: Mi! 


f) III' 























































































